Spending Bill OKd to Help Reignite Japanese Economy

After weeks of wrangling over political scandals, the Japanese Parliament on Thursday passed a crucial spending bill, part of an $86-billion package to jolt the economy out of its doldrums.

Lawmakers, scrambling until nearly midnight on the last day of this year’s special parliamentary session, also approved a partial package of political reform bills aimed at rectifying the unequal weight of rural and urban votes.

Nervous about declining tax revenues in the face of Japan’s worst economic slump since the 1973-74 oil shortages, lawmakers actually cut overall spending by the central government.

But under pressure to stimulate domestic spending and reduce Japan’s politically sensitive trade surplus, they also approved $15.3 billion for improving roads, housing and other public works, a 4.8% increase over the previous year.

“This is what was promised, and the government finally got its act together,” said Graeme McDonald, an analyst with James Capel Pacific Ltd. in Tokyo.

He referred to the tumult that has gripped Parliament as it and the nation have reacted to widening reports of links between top politicians and gangsters.

But other analysts warned that the new government spending is not nearly enough to restore confidence in the faltering economy, which has been weakened by plunging land and stock values, struggling banks saddled with billions of dollars in bad debt and sluggish consumer spending.

“In order to create that critical threshold, to stimulate further economic growth, we will need a second supplementary budget next year,” said Bernard Siman, an analyst with Jardine Fleming Securities Ltd.

Japan recently recorded its second consecutive quarter of negative growth for the first time since the 1973-74 oil shock. Newspapers are filled with grim news about the struggles of businesses from department stores to discos.