Murayama's campaign faces hurdle

Murayama's campaign faces hurdle

By Pierre-Antoine Donnet

TOKYO (AFP): The news that Japan's economic recovery has come to a grinding halt comes at a awkward moment for the country's ruling coalition, which is preparing for crucial parliamentary polls in less than two weeks.

The announcement by the Economic Planning Agency (EPA) on Tuesday may shake further the already fragile coalition government of Prime Minister Tomiichi Murayama which is locked in campaigning for the July 23 elections.

"We must take comprehensive measures" to stimulate the economy, the premier promised after the release of the EPA's latest monthly report in which the government admitted that the recovery had come to a standstill.

The July economic report downgraded the EPA's assessment of the domestic economy only 10 months after it declared the end of the country's worst post-war recession, which lasted three-and-a- half years.

EPA Director General Masahiko Komura strongly backed Murayama's comments, saying that the government would take all necessary measures to put the economy back on the path to recovery.

But the opposition and parts of the press are laying into the coalition, accusing it of inertia and incompetence at a time when drastic decisions, not cosmetic measures, are urgently needed to end the economic crisis.

Murayama, who is head of the Socialist Party, is campaigning for the polls with a prediction that there will be an economic upturn by the fall.

He has said that he intends to remain head of government and has promised to unveil in autumn a new package of measures aimed at stimulating the economy which has been persistently registering around zero percent growth.

But six recovery plans have been unveiled in Japan since 1992, none of them producing a convincing or lasting result.

The last such plan, announced in April and beefed up in June, also failed to bring the main economic indicators out of the red zone.

Hajime Funada, a top official with the main opposition Shinshinto party, said that the country's economic situation was far more serious than it was portrayed in the EPA report.

"I think the real state of the economy is much, much worse. It is beginning to slit into another recession," he told reporters.

He added that he did not expect the prime minister to fall from power as a result of the expected political setback for his party at the polls for upper house of parliament, but rather as a result of a worsening of the economic climate.

He said Murayama would quit in the autumn as the recession would have deepened by then.

Former prime minister Morihiro Hosokawa, one of Shinshinto's leaders, added to the chorus of criticism by slamming the governing coalition's inertia.

Voters go to the polls on July 23 to replace half of the 252 in the Diet's upper House of Councillors.

The EPA said that while the recovery had been halted, Japan had not fallen back into recession. The world's second biggest economy only emerged from recession last autumn.

Some Japanese economists however disagree with the official agency's diagnosis, saying that in fact the economy was probably already posting negative growth.

The country's largest newspaper, the conservative Yomiuri Shimbun, sharply criticized the absence of economic themes -- either in the coalition or in the ranks of the opposition -- worthy the stakes of the electoral campaign.

"The economic crisis in Japan, which stands second to the United States by accounting for 17 percent of global economy, poses a serious destabilizing factor for the international economy," the daily warned.