Japan PM Rallies Aides on Economy
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TOKYO (AP) _ Japanese Prime Minister Junichiro Koizumi ordered his top economic advisers Wednesday to devise a deflation-fighting, economic recovery plan by the end of the month, taking his first stab at major reform this year.
Koizumi instructed his advisers to devise a plan to reverse Japan’s continually falling prices, which undercut hope for a turnaround.
``We must aggressively implement concrete and effective anti-deflation measures,″ he said in a statement released after the evening meeting.
The order comes as Koizumi’s public approval rating has fallen to new lows _ in large part because he has recently been seen as bowing to anti-reformist members of his own party.
Koizumi’s decision Wednesday rekindled some faith in his promise to overhaul the economy. Japanese stocks rallied for the fourth straight session on reports that he and his ministers were preparing to act.
Japan has been dogged by deflation, or falling prices, as it slides into its third recession in a decade. It is a serious obstacle to a turnaround because it brings down income and further dampens economic activity.
Koizumi’s decision comes ahead of next week’s visit by President Bush, who is expected to lean on Koizumi to step up the pace of reforms. But Koizumi spokeswoman Misako Kaji denied that Wednesday’s announcement was prompted by Bush’s impending arrival.
``This was not done for Bush. It was done for the Japanese economy,″ he said. ``We want the results as soon as possible.″
The details of the plan have yet to be finalized.
Even Koizumi warned that the reforms wouldn’t produce instant results.
``For a while there will be little economic growth, but that the reforms are necessary for any growth in the future,″ he said.
Economics Minister Heizo Takenaka said a bare outline decided on Wednesday will target five basic policies already being pursued: Getting rid of the banks’ bad loans, stabilizing the financial system, re-energizing financial markets, helping small and medium sized companies get loans, and loosening monetary policy.
Economists have long fingered deflation as a problem Koizumi needs to address.
The government and central bank have come under pressure to possibly set a target for inflation _ a goal for getting prices to climb again. Falling prices are a problem, in part, because it devalues the land held as collateral by Japan’s banks against their billions of dollars in bad loans.
The Bank of Japan, which has set interest rates virtually at zero to pump more money into the financial system, has promised to maintain its loose monetary policy until consumer prices stop falling. The central bank kept monetary policy unchanged last week.
Speculation that government money may be needed to bailout the banks has grown. Public money was used during the 1997-98 financial crisis and afterward to prevent a meltdown in the banking sector.
Underlining the severity of Japan’s economic crisis, Moody’s Investors Service said Wednesday it will consider downgrading its rating on the Japanese government and several private banks.
Moody’s said it was reviewing the Aa3 rating of yen-denominated domestic securities issued or guaranteed by the government of Japan.
The company also said it would review the credit ratings of five private banks: Shizuoka Bank, 77 Bank, Chugoku Bank, Shinkin Central Bank, and Norinchukin Bank.
Moody’s sited deflation as a major reason for the country’s worsening overall credit risks.