Japan Unveils Package to Stimulate Its Economy, Revive Stock Market

Japan announced a set of economic steps Tuesday aimed at stimulating its economic recovery and reviving its battered stock market.

Even before the steps were unveiled, however, Finance Minister Masayoshi Takemura said there are more to come.

“The government has done its utmost in drafting the measures, but this will not be the end of measures to stimulate the economy,” he told a news conference.

The government said the latest measures are needed in order to follow up and reinforce an economic package adopted April 14 to ease the economic pain caused by the recent steep rise in the yen. At that time, the Bank of Japan moved to cut its key official discount rate to a historic low of 1%.

Fears about the economy, including moribund stock prices and an unemployment rate that dipped only slightly to 3.1% in May, are intensifying, and Japan hopes the latest steps will ensure a stronger recovery, the government said.

One of the main features of the stimulus package is an acceleration of spending on public works. Of the budget for projects in the fiscal year that began April 1, the government will try to spend 75% in the first six months.

The government also said it will continue a temporary income tax cut through fiscal 1996, which ends in March, and it pledged to open an over-the-counter division of the stock market by July to allow venture capital companies to raise funds.

Other steps include moves to broaden the limits on margin trading of stocks and the suspension of a securities tax seen as discouraging companies from buying back their own shares.

Economists had been watching to see whether the government would commit itself to using public money to help financial institutions dig out from under mountains of bad debt. But Tuesday’s announcement went little beyond previous statements, with the government saying it would study ways of solving the problem. The burden of bad loans has prevented banks from increasing their lending to spur business activity.

“All in all, the fact that the package exists is a good sign. . . . At least it gives a message of concern,” said Robert Feldman, an economist at Salomon Bros. “But I didn’t see much fruit in this package.”

The stock market--which has slumped to near three-year lows this month, partly on the perception that the government has not been doing enough to prop up the economy--plunged in the last hour of trading after the announcement.

The benchmark Nikkei 225-stock average finished down 386.31 points to close at 14,759.05, with almost half the drop coming in the last hour.

Business leaders were also lukewarm to the package. Some said they welcome the moves, but Shoichiro Toyoda, chief of the Japan Federation of Economic Organizations, said he was disappointed that more measures were not taken to lighten the tax burden on businesses.