The economic package that the government unveiled on Wednesday, together with the Bank of Japan's decision to expand the credit supply, represents a concerted attempt to fight deflation. The comprehensive program includes measures to accelerate disposal of bad bank loans, help rebuild debt-heavy but viable businesses, and spur economic growth. But whether it will really speed up bad-loan write-offs is at best uncertain.

The bank reform plan -- the centerpiece of the package -- is a far cry from the hard-hitting draft worked out by Mr. Heizo Takenaka, the financial services minister who oversees the banking system. The safety nets for easing the impact of debt cleanup, such as from increased bankruptcies and layoffs, are anything but sufficient. There are no effective measures to create new demand.

The bank restructuring plan calls for, among other things, strict assessment of bank capital. Its keyword is "deferred tax assets," a banking term that refers to future refunds on taxes paid for loan-loss reserves. The trick is that these future tax credits are counted as part of capital. In the case of top banks, these make up about 40 percent of their equity capital. This has given rise to criticism that bank capital is "inflated."