Miyazawa hints at steps to spur corp restructuring

Miyazawa hints at steps to spur corp restructuring

MANILA (Dow Jones): Japan gave fresh indications over the
weekend that it's serious about ridding its economy of excess
capacity, but dashed hopes once again of new fiscal spending to
boost growth.

At the 32nd annual meeting of the Asian Development Bank,
which ended Sunday, Japanese Finance Minister Kiichi Miyazawa
emphasized the need for Japan to address massive excess capacity
weighing on the economy by spurring the process of corporate
restructuring.

"There are issues that have to be tackled from now, and
corporate restructuring is something we have to see," Miyazawa
told a news conference Saturday.

Cleansing the economy of excess capacity is a must before
Japan can get back on a steady growth path, analysts say. But
waiting for Japan to trim the excess fat -- and many observers
estimate it will take at least five years -- is cold comfort to
the region's embattled economies, looking to Japan to take
swifter recovery measures.

Recognizing the need to speed up the process, Miyazawa said
that policy steps, which could include tax incentives to
encourage companies to shed redundant facilities and measures to
ease the pain of adjustment, "may be necessary."

He made clear, however, this wouldn't put additional pressure
on the country's deteriorating fiscal condition, saying it would
only become a "small fiscal burden ... not a so-called big fiscal
burden."

These remarks came just days ahead of a meeting scheduled
Monday between Japanese Prime Minister Keizo Obuchi and U.S.
President Bill Clinton and could be a precursor to an
announcement of a package of measures to breath life into the
economy, albeit ones lacking fiscal punch.

While such steps would be welcome, they would fall short of
the expectations of Japan's neighbors and its counterparts in the
Group of Seven industrialized countries.

The G7 last week called on Japan to use "all available tools"
to support strong domestic-demand led growth, and said its
economy's "short-term prospects remain uncertain."
Says Govt Isn't Planning Additional Spending

But Miyazawa stuck to his guns at the ADB meeting, reiterating
that the government is gauging the impact of current measures and
isn't planning further spending.

"It's necessary to see the effects (of the steps already
taken). I don't think there will be (additional) spending right
away," Miyazawa said.

To be sure, Japan has taken substantial measures to jumpstart
its economy, including a massive bailout of its banking system,
monetary easing that has pushed short-term interest rates to near
zero, as well as record amounts of government spending.

The Japanese government insists those steps will be enough to
eke out growth of 0.5 percent in gross domestic product in the
current fiscal year ending March 31, 2000.

But most analysts say that target is hugely optimistic and
warn that, by frontloading some 80 percent of public works
spending to the first half of the fiscal year, the government has
set the economy up for a sharp slowdown in the second half.

Consequently, there have been growing calls for a fresh fiscal
package to fill the gap after the government spends 15 trillion
yen on public works in the first six months - out of a total 19
trillion yen budgeted for the full year.

But Miyazawa reiterated to a gathering of finance ministers
from the Association of Southeast Asian Nations at the ADB
meeting that he isn't considering a supplementary budget,
according to a Finance Ministry official who was at the talks.