Japan plans 8 trillion fiscal boost

JAPAN's ruling Liberal Democratic Party (LDP) yesterday indicated that the long-awaited economic stimulus package would include at least 8 trillion yen (pounds 36bn) of fresh fiscal measures, including tax cuts.

Appearing on Japanese television, Taku Yamasaki, the LDP's policy chief, said that the package would contain the largest amount in fresh fiscal spending ever. Asked how much that would be, he said: "If it were 8 trillion, that would be the biggest ever."

He vowed the plan would be based on the view that the economy is in a severe state. He said the plan "will not betray the hopes of the people".

His comments follow a pledge in London over the weekend by the Japanese Prime Minister, Ryutaro Hashimoto, that firm measures would be taken to boost the country's ailing economy.

The government would do "all we have to for Japan" he said at the end of the two-day Asem meeting of Asian and European leaders.

Separately, the Economic Planning Agency chief, Koji Omi, predicted that Japan would achieve the official target of 1.9 per cent growth for the fiscal year that started 1 April.

But financial analysts said promises of tax cuts alone would not clear the concerns over the economy which has kept consumers at home.

The Nikko Research Center said a combination of tax cuts were necessary, including lowering the maximum rate of income tax from 50 to 40 per cent and slicing the effective rate of corporate tax from 46.36 to 40 per cent.