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Outline of Emergency Economic Package

(Provisional translation by EPA)


Introduction

This Emergency Economic Package is the first step toward putting the Japanese economy on the track to recovery within the next year or two. The Package aims to achieve the following three goals during the coming 1999 fiscal year.

(1)To create sufficient demand to underpin firm confidence that the economy will definitely achieve positive growth in FY1999.

(2)To create jobs and new businesses to prevent increased unemployment.

(3)Advance international coordination, especially focusing on reducing external economic friction.

Chapter I: Emergency Economic Package and the Road to Revitalization of the Japanese Economy

1.The Current Economic Situation

The Japanese economy is in an extremely severe situation. It is imperative that sufficient measures be taken and proper monitoring be made during the second half of this fiscal year and during the coming fiscal year.

2.Basic Policies of the Emergency Economic Package

*In order to underpin firm confidence that the economy will definitely achieve positive growth in FY1999, together with measures to stabilize the financial system and alleviate the credit crunch, economic recovery measures must be implemented immediately.

*Economic recovery measures must be implemented in accordance with the three principles for recovery of 1. Speediness; 2. Generation of a ripple effect; and 3. Being future-oriented.

*This Package will be implemented with a recognition of the extreme importance that revitalization of the Japanese economy has for the global economy, and in particular, the economies of Asia, which are linked with Japan by close relations of interdependence.

*Under these guidelines, a package totaling over 17 trillion yen is urgently drafted with the objective of creating one million new jobs and achieving better employment prospects. (If we take the permanent tax deduction which is over 6 trillion yen into account, this package is well over 20 trillion yen in total.)

3.The Road to Economic Revitalization

(1)This Package is the first step in policy measures taken with the goal of putting the Japanese economy on the track to recovery within the next year or two. Flexible and effective economic management will be conducted in order to ensure that economic revitalization can be achieved by FY2000.

(2)FY1999 will be a year in which we achieve a clear transition to definitely positive growth and a solidifying of the foundation for recovery.

(3)FY2000 will be a year in which the economy is firmly placed on the track to recovery. The progress achieved during these two years will be carefully monitored to ensure that from FY2001 there is steady economic growth led by private-sector demand.

(4)Based upon the path to economic revitalization outlined above, an outlook will be made for the medium-term economic prospects and modalities for policy responses.

Chapter II: Emergency Measures to Revitalize the Economy

I.Measures to stabilize the Financial System and Alleviate the Credit Crunch

1.Measures to stabilize the Financial System

*Ensure effective operation of the system to recapitalize financial institutions.

*Effectively implement inspections and supervisory administration to facilitate credit extension and promote recapitalization of financial institutions and efficient management.

*Encourage financial institutions to take voluntary measures to recapitalize.

*Improve disclosure of information by financial institutions.

*Enhance supervision by better monitoring of the financial situation and others related to financial institutions.

2.Alleviate the Credit Crunch

*Strengthen measures to alleviate the credit crunch and credit-shrinkage, caused by the recovery of loans by assisting moderately-large enterprises, on top of small- to medium-size enterprises.

*Expansion and diversification of the route of credit supply.

3.Appropriate and flexible operation of monetary policy by the Bank of Japan.

II.Economic Recovery Measures Which Contribute to Building a 21st Century Society

1.Implementation of Leading 21st Century Projects

The Ministries and Agencies of the Government will cooperate to boldly introduce projects spanning the following four pioneering, future-oriented themes: 1. Realization of an Advanced Electronics-Oriented Nation, 2. Promotion of Transportation and Lifestyles of Future Cities, 3. Creation of A Safe, Secure and Affordable Lifestyle, and 4. Establishment of a Society with Stability of Employment Based on Advanced Technologies and High Mobility.

2.Measures to Activate Living Space

*Adoption of the Plan to Double the Size of Living Space

This plan aims to give the people a more affordable and abundant lifestyle by doubling the space of living.

*Increase Liquidity of Land and Debt

*Promote Housing Investments (approximately 1.2 trillion yen)

Efforts will be made to secure wide-availability of good quality housing and vitalize the housing sector by lowering the interest rates on loans from the Housing Loan Corporation, significantly expanding lending limits and steadily implementing measures to assist people facing difficulties to repay housing loans.

3.Measures to Promote Industrial Revitalization and Employment Creation

*Adoption of the Industrial Revitalization Plan (Including measures to assist small and medium-size enterprises)

Measures will be taken to encourage the establishment of new businesses, the activation of existing companies, to stimulate development in fifteen new and growing sectors, to facilitate smooth job transfers, to promote creative technological development and dissemination, to advance information technology and its infrastructure and to increase investment for upgrading distribution system.

Measures to support venture businesses and to assist businesses in central urban districts and other small- and medium-size enterprises.

*Measures to Create Employment (approximately 1 trillion yen)

Implementation of the Comprehensive Plan to Create Employment

Creation of the Special Fund for Emergency Employment Creation (Provisional Name)

4. Focused Investment of Social Infrastructure (approximately 8.1 trillion yen)

*Social infrastructure projects of the package will be focused on the following seven priority areas; 1. Telecommunications and Science and Technology; 2. The Environment; 3. Social Welfare, Health and Medical care and Education; 4. Increased Efficiency of Distribution and Enhanced Industrial Competitiveness; 5. Regional Activation of Agricultural, Forestry and Fishery Villages and Other Areas; 6. Urban Revitalization Including Private-Sector Investment Incentives; and 7. Disaster Prevention. An appropriate response will also be taken to disaster recovery.

*Full consideration will be given to assisting regions such as Hokkaido which are facing especially difficult economic situations and to the situation of industries which have been especially affected by the economic recession.

*The necessary measures will be taken to promote the Private Financing Initiative (PFI) in order to mobilize private-sector capital.

5.Permanent Tax Reduction and Other Measures

*Reduction in individual income taxes (with maximum tax rate of 50%, at approximately 4 trillion yen)

*Reduction in corporate income taxes (with effective tax rate of approximately 40%)

*Discussion of special taxation measures promoting such areas as housing construction and private-sector capital investments.

*"Regional promotion coupons" to stimulate individual consumption and activate regional economies. (approximately 0.7 trillion yen)

6.Suspending of the Fiscal Structural Reform Act

*Deciding to suspend the Fiscal Structural Reform Act, necessary bills will be submitted during the next Diet session.

III.Reducing the Risks to the Global Economy

The revitalization of the Japanese economy is important for the global economy, and particularly for the economies of Asia. Assistance will be provided to the economies of Asia, which are linked with Japan by close relations of interdependence. (approximately 1 trillion yen)

1.Measures to Assist the Nations of Asia Facing the Currency Crisis and Other Difficulties

*Assistance will be extended to the nations of Asia facing the currency crisis and other economic difficulties by loans from the Export-Import Bank of Japan, through yen loans and by the establishment of an Asian Currency Crisis Assistance Fund. (Provisional Name)

2.Assistance for Subsidiaries of Japanese Corporations in Asia

*In order to assist the subsidiaries of Japanese corporations in Asia, which play an important role in the economies of Asia, measures such as the extension of loans from the Small Business Finance Corporation and the People's Finance Corporation, the provision of financial assistance to facilitate the participation of Japanese corporations, and the urgent consideration of the foundation of special yen loan scheme aimed at economic structural reform will be provided.

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