Japan Ambiguous on U.S. Demands; Pressure to Stimulate Economy Reveals a Contradiction in Goals
Japan has given a clear response to U.S. demands that it stimulate its domestic economy: yes, no, maybe so.</br></br>Take today, for example. First came the news reports this morning that the Japanese government was considering tax cuts. Then, later in the day, Prime Minister Ryutaro Hashimoto backtracked slightly, ambiguously urging "caution" on the tax cut issue.</br></br>Japan's chief government spokesman, Kanezo Muraoka, also spoke up, saying Japan would pursue both economic stimulus and fiscal reform. Most economists say that these goals are contradictory. The government will have to spend money to stimulate Japan's economy quickly, but is also planning to cut spending to meet fiscal reform goals.</br></br>Today's mixed signals are just the latest in a litany of vague and often contradictory statements about economic programs made by Japanese officials since last weekend's Group of Seven finance ministers meeting in London, where Japan was pressured to boost its economy.</br></br>For example, some officials are vigorously trying to jawbone stock prices higher, setting a target of 18,000 on the Nikkei 225-stock index by March 31. The date is important because that's the end of Japanese banks' fiscal years, and they may have to report dramatically lower values on their stock market holdings if prices don't rise.