Japan’s Plan to Revive Economy Eases Regulations but Not Taxes

Ignoring appeals from business leaders for tax cuts or increased spending, Japan unveiled an economic revival plan Tuesday that centered on slashing business regulations.

Economic Planning Agency Director General Koji Omi said the nation cannot afford to spend its way out of its economic slump.

“The economic policy package should . . . be consistent with policies for resolving the structural problems in Japan,” Omi said at a news conference.

Business leaders had insisted that tax cuts or more government spending were the only ways to give the economy--the world’s second-largest after the United States--the immediate boost it needs. The government promised to consider tax cuts.

Despite the modest tenor of the latest reform proposals, Tokyo stock prices soared for a second day after Prime Minister Ryutaro Hashimoto suggested the government might do more to help troubled banks. The dollar also edged higher against the yen.

The benchmark 225-stock Nikkei index gained 443.25 points, or 2.72%, closing at 16,726.57. On Monday, the average had surged 1,200.80 points, or 7.96%.

The United States has repeatedly urged Japan to bolster economic growth at home so it doesn’t have to rely so much on exports. But Hashimoto has shied away from tax cuts or government spending increases, in line with his pledge to cut government debt.

Key components of the plan, which contains about 120 measures, include increasing government loans to small and medium-sized businesses, spending more for an international airport in central Japan and speeding up construction of a national fiber-optic network.

It would also allow private companies into the market for elderly care, let banks and insurers sell mutual funds and expand a government-run housing loan program.

“It is necessary for the government to strongly promote these measures to wipe out uncertainty over the economic outlook,” Kyodo News quoted Hashimoto as saying.