Summary of Comprehensive Economic Measures(Preliminary translation by EPA)

April 24,1998

1. Opening up prospects for the 21st century with comprehensive economic measures

The Japanese government must carry out three tasks simultaneously in order to quickly return the Japanese economy to a strong recovery path and to achieve an economic society with good performance and high potential in the 21st century.

(1) Implementation of drastic measures to boost domestic demand through social infrastructure investment and tax cuts.

(2) Strong promotion of economic structural reform. The above-mentioned measures to expand domestic demand should be consistent with the long-term direction of economic structural reform to improve the basic conditions of the Japanese economy. The economic measures should include the promotion of regulatory reform to enhance private-sector performance and social infrastructure investment which are indispensable in the 21st century.

(3) Promotion of writing off bad loans which are impeding an economic recovery.

Based on the above-mentioned basic concept, the government will implement the following comprehensive economic measures. Regarding the size of the fiscal burden of the economic measures, tax cuts and social infrastructure investment by the central and local governments will total around 12 trillion yen, while the sum of all project expenditures will be more than 16 trillion yen, the largest in history.

The Fiscal Reconstruction Law will be revised following a decision by the Conference on Fiscal Structural Reform.

2. Contents of the economic measures
(1) Meeting demand for social infrastructures in the 21st century

Social infrastructure investment which are indispensable in the 21st century should be implemented so that the basic economic conditions are improved and strengthened while raising living standards. A total of around 7.7 trillion yen in projects will be implemented by the central and local governments.

1) Social capital formation mainly by the central government

-- Around 1.6 trillion yen in special projects for environment and new energy will be implemented in a bid to achieve an economic society that is harmony with the environment.

-- Around 1 trillion yen in special projects for information and communications and science and technology will be implemented in order to upgrade these areas to provide important base for the future development of the Japanese economy.

-- Around 1 trillion yen in special projects to improve social welfare, medical treatment and education will be implemented in view of the rapid aging of society and a lower birth rate.

-- Around 800 billion yen in special projects will be implemented for the efficient supply of diversified distribution services.

-- Around 800 billion yen in emergent disaster prevention projects will be implemented to protect national lands from disasters as well as people's lives and assets.

-- Around 800 billion yen in special projects for inducing private investment through the redevelopment of downtown areas will be implemented to maximize economic impact of public investment.

-- Around 200 billion yen in disaster reconstruction will be implemented without delay.

2) Promotion of independent public work projects by local government

-- The central government will request local governments to increase their independent public works without financial support form the central government by 1.5 trillion yen in order to build up social infrastructure reflecting regional situations.

3) Front-loading of public works

-- Implementation of public works will be front-loaded by more than 81 per cent, an historical high.

4) Promotion of PFI

-- The government will strongly promote the Private Finance Initiative based on the new method of utilizing technology, business management and the financial power of the private sector.

5) Promotion of private housing investment

-- The government will promote housing investment by easing conditions for housing loans from Housing and Loan Cooperation.

6) Measures concerning the Hokkaido economy

-- Public works will be intensively allocated to Hokkaido areas to stimulate the regional economy.

(2) Stimulating the economy through tax cuts

Additional and continued special income tax cuts will be implemented for income tax and local resident tax ( 4 trillion yen in total).

Special policy consideration will be made for business and housing investment.

1) Implementing additional and continued special tax cuts (4 trillion yen)

A 2 trillion yen income tax cut including the local resident tax has already been implemented this year. A 2 trillion yen fixed tax cut will be also implemented. This will reduce tax payments by 29,000 yen per individual tax payer and 14,500 yen per a dependent. Implementation of the income tax cut for employees will start from Aug. 1, 1998.

A 2 trillion yen special tax cut will also be implemented next year, with the implementation method to be examined later.

2) Implementing tax cuts for special policy purposes

-- Special policy considerations will be made for business and housing investment.

3) Examination of the corporate tax system

-- Study will be done to lower the comprehensive corporate tax rate close to the international standard as soon as possible within three years

4) Income tax

-- Income tax will be studied from a wide range of viewpoints toward creating an equal and transparent tax system that assures high incentives for workers.

(3) Promotion of economic structural reform

It is necessary to create a flexible and creative economic structure to meet changing demands by fully utilizing Japan's high quality capital, human resources and technology under optimal conditions.

The government will set up basic infrastructures to support development of the Japanese economy by allowing the private sector to exert its full strength on a complete self-responsibility principle.

To this end, the below-mentioned measures will be implemented in addition to the strong promotion of regulatory reform following the "Three Year Deregulation Promotion Plan" made up recently.

1) Fostering venture enterprises

The government will foster venture enterprises by setting up a business environment where creative individuals and enterprises can aggressively explore new technology and new businesses.

-- Debt guarantee for venture enterprises will be enforced.

2) Measures for small and medium-sized enterprises

It is important to help small and medium-sized enterprises as part of strongly promoting economic structural reform. To this end, support measures for small and medium-sized enterprises will be implemented, including the expansion of financing to such enterprises to assure smooth fund flows.

-- Legal definitions of wholesale and retail industries will be revised to expand the scope of industries that can receive small and medium-sized enterprise financing.

-- Additional investment in capital for government financial institutions will be implemented.

-- Computerization of small and medium-seized enterprises by providing information processing devices and systems will be promoted.

3) Employment policy

The government will take all possible measures to ensure stable employment. Creating a mobile labor force is also necessary to increase employment in newly created business areas as employment adjustment continues in conventional industries. The high labor potential of the aged and woman should be utilized amid the aging society and the lower birth rate.

-- Implementing the "Urgent employment development program" (50 billion yen increase for employment adjustment subsidy)

-- Reviews will be done on the following restrictions for worker dispatching business after receiving a conclusion from the Central Employment Security Council: general prohibition for all job categories, dispatching period and protection measures for workers.

4) Reform of the fund supply system

The government will promote fund flows to new enterprises and new industries through diversified channels as the indirect finance system mainly through banks, which heavily relies on collateral, is showing its limit due to severe asset deflation. The further improvement in efficiency of asset management will be promoted by making good use of investment advisers.

-- Deregulation will be implemented for investment adviser business and securities investment trust management.

-- Funds for financial liberalization in the form of operating funds of postal savings, will be increased (4 trillion yen) to assure the sound management of postal savings fund operations and facilitate the flow of postal savings funds back to the market.

(4) Facilitating circulation of lands and securities in the market and promoting effective use of lands

Bad loan problems will be thoroughly solved by promoting liquidity in the land market by implementing substantial and comprehensive measures aimed at the quick and smooth disposal of the debt-credit relationship, integrating lands by rearranging complicated ownership and promoting the redevelopment of urban areas and the creation of land demand for the drastic redevelopment of cities.

A comfortable living environment and the efficient use of land space for economic activities should be achieved based on an approach emphasizing the importance of land as an economic resource.

To this end, a total of 2.3 trillion yen will be additionally spent.

1) Quick and smooth disposal of debt-credit relationship

-- Submitting "Emergent Coordination Committee for Real Estate Legal Claims (tentative name)" to the next Diet will be examined to dispose of such complicated debt-credit relationships as bad loans with land collateral.

-- Setting up markets for asset backed securities by promoting disclosure of real estate investment information and studying possibilities of operating funds from postal saving and insurance into the asset backed security market.

2) Integrating lands by rearranging complicated ownership and promoting redevelopment of urban areas

-- The "Headquarters for Promoting Efficient Land Use (tentative name)" will be established under the Housing and Urban Development Cooperation. The capital investment system for land acquisition will be established and the appropriate utilization of Fiscal Loan and Investment Program will be implemented. The Organization for Promoting Urban Development will expand land acquisition business and improve the system to promote urban development.

3) Creation of land demand for drastic redevelopment of cities

-- The government will actively respond to public demand for land to achieve the drastic redevelopment of cities to implement disaster prevention measures, welfare for the aged, and the redevelopment of downtown areas. A wide range of measures will also be implemented in order to compensate for demand shortage in the private sector.

(5) Supporting measures for Asia

The following measures will be implemented in close cooperation with such international organizations as the IMF and G7 countries to support the stabilization of the economies and promote the economic structural reform of Asian countries facing economic difficulties due to financial and currency turbulence.

-- Support for facilitating trade finance utilizing "two step loans" of Japan Import Export Bank

-- Support for economic reforms by setting up an emergency special interest rate system for yen-denominated government credits with early disbursement.

-- Improvement of support for human resource development such as accepting trainees and dispatching specialists

-- Support for securing basic necessities of life such as food and medical supplies (Government rice to Indonesia, 500 thousand ton of loan, 100 tons of aid)

3. Following up of the economic measures

The government will implement items among these economic measures surely and quickly to restore an earlier strong recovery of the Japanese economy. To this end, a conference of related ministries for major areas of the economic measures will be held as occasion demands under the Chief Cabinet Secretary to review results of each measure. The conference will also discuss and implement necessary measures.