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The Liberal Democratic Party, holding its national convention Thursday in Tokyo, sounded a note of support for Prime Minister Junichiro Koizumi’s determination to battle deflation.

In his speech to the gathering, Koizumi, who is also president of the LDP, said fighting deflation is “the biggest economic agenda” for his Cabinet, and added that the Japanese people should be more optimistic in tackling the problem, given that the country has survived such major economic crises in the past as the oil shocks of the 1970s and the sharp rise in the yen’s value in the 1980s.

The party also confirmed the need to prepare for and win local elections in April. As is the case every four years, thousands of gubernatorial, mayoral and assembly seats will be contested.

The LDP’s annual policy platform for the year remained rather vague on the issue that sharply divides many LDP lawmakers — whether to turn to pump-priming measures such as outlays for public works, as demanded by many party members, or to stick to the austerity plan that the prime minister has advocated as part of his structural economic reform stance.

Meanwhile, the party platform called for both the disposal of bad loans held by banks and measures to support smaller firms. Koizumi also advocates the quick disposal of sour loans, but that is expected to make many weak firms go bankrupt and result in more unemployment.

“The most important message we want to convey is that bad-loan disposal and corporate revival are two wheels on the same axis,” the paper said.

The annual party meeting, meanwhile, saw for the first time the attendance of the top leader of the Japanese Trade Union Confederation (Rengo), as the prolonged economic slump is pushing up the jobless rate and deepening the sense of crisis among trade unions. “Maintaining employment is the No. 1 mission for labor unions,” Rengo Chairman Kiyoshi Sasamori told the gathering. “For that purpose, we’ll go anywhere, anytime, to see anyone.”

Rengo officials have recently indicated that the confederation may back the election campaigns of some candidates running on the tickets of the ruling coalition parties, including the LDP. This would be a break from labor unions’ past tradition of supporting non-LDP forces.

This is widely seen as an effort by Rengo to maintain a political voice, as the Democratic Party of Japan, the main opposition, has been suffering low public approval ratings in recent media polls.

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