Policy Package Fails to Relieve Japan’s Angst

Japan’s economic gloom deepened Friday as policymakers failed to relieve fears expressed at home and abroad that the nation risks sliding into recession and that a financial system crisis might be looming.

While some economists said the pessimism appeared excessive, investors found little to reassure them.

The Tokyo stock market’s main barometer--the 225-share Nikkei average--plunged briefly below the critical 15,000 level for the first time since July 1995. It fell as low as 14,966.13 before reviving a bit to finish down 2.23% at 15,082.52.

Markets gave the cold shoulder to proposals announced Friday by the ruling Liberal Democratic Party, which failed to heed calls for authorities to loosen their tight fiscal stance through cuts in corporate and personal income taxes.

The latest LDP package, to be followed by a third and final installment next month, contains steps to encourage housing investment and help small firms, and urges using funds from the postal savings, pension and insurance systems for public works.

It also urged the introduction of a system to encourage private finance to fund investment in public infrastructure.

But the proposals, to be reflected in a government package next week, fell far short of the cuts in net corporate tax and personal income tax that many in the markets want to see.

The latest bout of anxiety came as Japan’s own economic experts said the nation’s stalled economy could get worse, but denied that it has fallen into a recession.

“Although the basic trend of a recovery centering on private demand has not been lost, corporate sentiment is showing severity and the economy has stalled,” the Economic Planning Agency said in its monthly report.