Asia Times: Japan to tackle unemployment: new budget possible



	April 27, 1999	atimes.com

Japan Economy

Japan to tackle unemployment: new budget possible

TOKYO - Japan will unveil plansnext month to stem the rising jobless rate, adding toexpectations that a new budget is on the way to pump extramoney into the stalled economy.

''Taking the current severe job-market situation, thegovernment has decided to take measures,'' said Hiromu Nonaka,the chief Cabinet secretary.

Japan's economy has shrunk for five straight quarters and hasbeen stagnant for nine years - longer than it took to recoverfrom the ravages of World War II. Even though the governmenthas injected about 120 trillion yen ($1.02 trillion) since 1992 tocrank up the economy, the jobless rate is at a record andconsumers balk at spending enough to fire a recovery.

Japan's recession is largely to blame for the slow worldgrowth that's expected this year, the International MonetaryFund said this week. Prime Minister Keizo Obuchi plans tobrief President Bill Clinton on new spending as well as movesto open industries to more foreign investment when the leadersmeet in Washington next month, said a government official whois familiar with arrangements for the trip.

''It's pretty clear we are going to get a supplementarybudget, the question is timing,'' said John Neuffer, seniorresearch fellow at Mitsui Marine Research Institute, a unit ofJapan's third-largest casualty insurer.

The push for jobs programs ''is an effort by people whowant supplementary spending to get Obuchi to go in thatdirection,'' Neuffer said.

At a Cabinet meeting Friday, Prime Minister Keizo Obuchiasked International Trade and Industry Minister Kaoru Yosanoand Labor Minister Akira Amari to draft policies to bolsteremployment, Nonaka said.

Obuchi must seek re-election as president of the rulingLiberal Democratic Party in September and must call generalelections next year. The LDP, which has run Japan virtuallyunchallenged for the entire postwar period, was routed inelections for Tokyo governor early this month.

The prime minister has pledged to achieve economic growthof 0.5 percent in the year ending March 31. The economy willprobably contract 0.8 percent this fiscal year, according toan average of 16 economists surveyed by Bloomberg News.

Officials at the central bank and the Bank of Japan havesaid government largess - the latest round of which began toflow just four months ago - is just about the only thingstopping the economy from getting worse. When the tap driesup, the outlook could deteriorate again.

At the same time as pledging job creation plans,Cabinet ministers are going out of their way to play downsuggestions that the government will have to propose a newbudget. Japan's jobless rate rose to a record 4.6 percent in February.

Yosano said talk of a new budget is ''nonsense'' andTaichi Sakaiya, director-general of the Economic PlanningAgency, said the government doesn't plan to ''aggressivelyboost'' spending. Finance Minister Kiichi Miyazawa said it'snot necessary to compile a new budget now.

''They don't want to come off as looking panicked,'' saidNeuffer of Mitsui Marine. ''The other side of it is theMinistry of Finance would be digging its heels in . . . giventhe massive budget deficit problem this country faces."

The government itself hasn't been clear on the need for anew budget over the past week.

Two days ago, Ichizo Ohara, an LDP member of parliamentand an adviser to Obuchi, said after a meeting with Sakaiyathat the EPA chief wants more government money poured into theeconomy and favors a new budget this year to provide the cash.''Sakaiya said 0.5 percent growth seems difficult and hewants a supplementary budget,'' Ohara said on Wednesday.

As he tried to distance himself from the idea of anew budget Friday, Sakaiya added that it is not necessary for the central bank to buy new bonds directly from the government. Some legislators have called on the central bank to take the stepto make it easier for the government to sell more bonds without causing a rise in long-term interest rates.

Still, Sakaiya said the BOJ may need to consider loweringyields on bills and money market deposits at maturity ofbetween two months and one year to further ease credit.

(Bloomberg)

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