Hosokawa Says Japan Reform to Come Soon : Pledges: Prime Minister’s goals include deregulating and stimulating economy, helping farmers and reversing downturn. But he does not address specifics of tax reform.

TOKYO — Prime Minister Morihiro Hosokawa on Friday promised action early next year on plans to deregulate Japan’s economy and boost economic recovery.

Hosokawa cited telecommunications and information as sectors where deregulation will bring job growth. He pledged at a news conference to help farmers become more competitive as Japan opens its doors to increased food imports. He also called for financial and fiscal measures to promote land sales and new construction.

The prime minister failed, however, to announce the specifics of plans for a long-discussed income tax cut and other fiscal measures designed to pull Japan out of its lingering economic downturn.

And while he acknowledged severe differences within his seven-party ruling coalition over economic policy, Hosokawa insisted he was “absolutely certain” it can reach agreement on the key issue of tax reform.

Many in Japan--from stock investors and business leaders to ordinary citizens--had been hoping that Hosokawa would move more quickly on an economic stimulus package. But the government has been deadlocked on specific economic policies, and Hosokawa instead has placed top priority on winning parliamentary approval of political reforms.

Almost immediately upon taking office in August, Hosokawa promised to enact an anti-corruption package by the end of the year, pledging to “take political responsibility” if he failed to meet that self-imposed deadline. That comment generally was interpreted as a promise either to resign or call new parliamentary elections if the political reform package could not be passed.

At Friday’s news conference, Hosokawa apologized to the nation for his failure to meet the year-end deadline, but expressed determination to achieve passage in January. He sidestepped the question when asked if he will call a snap election should the reforms fail to pass by his new target date.

“I have yet to give any consideration to a thing like that,” Hosokawa said. “It is my duty to do my best until reform legislation is indeed enacted. . . . That is the way to fulfill my political responsibility.”

The reforms passed the lower house of parliament in November, but they remain stalled in the upper house. The current session of parliament has been extended to the end of January, largely to deal with the political reform package.

The outlooks for political reform and the economy are intertwined in many ways. Any failure to enact political reform has been seen as a threat to the government’s stability, affecting both the Hosokawa cabinet’s hold on office and its ability to make economic policy.

Over the past month, any signs that the government was prepared to move quickly on an economic stimulus package have sent Tokyo stock prices sharply upward, while new indications of political instability or policy indecision have brought quick declines.

The pattern held Friday, as the Nikkei average closed down 304.63 points at 17,141.11. Losses for the week totaled 910.80 points.

There is general agreement within Hosokawa’s government that income taxes should be cut. There also has been much discussion that such a cut should be balanced, at some point, by an increase in the consumption tax, which is similar to a sales tax. But sharp differences on the latter lie at the core of delays in formulation of an overall stimulus program.

One faction within the ruling coalition, consisting mainly of the Socialists, opposes any consumption tax increase. Another faction favors an increase--but only several years after an income tax cut. Both of these approaches are aimed largely at giving a quick boost to the economy.

Still others in the coalition, with strong backing from Ministry of Finance bureaucrats, insist that an income tax cut should be paired with an immediate consumption tax increase.

This option aims less at economic stimulus than at preparing Japan for the day when it has an older society, with a smaller percentage of its population in the work force. It is based on the premise that retirees--especially those with large spending power--must carry a bigger share of the tax burden.

In his comments Friday, Hosokawa defended his go-slow approach to resolving the conflict. “Even if it takes a little more time,” he said, “it is crucial that my decision is firmly based on careful deliberation.”