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.