Originally created 08/01/98

Japan's prime minister promises quick economic fix



TOKYO -- Promising an improved approach to solving his country's economic problems, Japan's new prime minister said Friday his government will take prompt action to increase economic growth and fix the debt-ridden banking system.

The government, meanwhile, released more bleak news: Japan's unemployment rate surged to 4.3 percent in June, up from two consecutive months at 4.1 percent. June's rate is the highest since the government began compiling unemployment data in 1953.

In his first news conference since Parliament elected him prime minister Thursday, Obuchi said Friday, "This will be a fresh new Cabinet that will strive with all its might to take decisive, speedy action to deal with difficult problems."

Hours after his election, Obuchi named what he has dubbed his "economic recovery Cabinet." It includes a widely respected former premier as finance minister, the Cabinet's most prominent economic post.

Obuchi said Friday he would quickly implement economic stimulus measures that he promised while campaigning last week to win his party's nomination.

These include $42 billion in tax cuts to lower Japan's rates to U.S. and British levels and $70 billion in extra public works spending. He also promised a cut of up to a 20 percent in bureaucracy over five years.

However, critics consider Obuchi, a former foreign minister, to be too beholden to the special interest politics that dominate the Liberal Democratic Party. They say those interests will keep Obuchi from taking the bold, innovative steps needed to solve the structural flaws of the Japanese economy.

Obuchi tried to reverse that image this week by naming former Prime Minister Kiichi Miyazawa as finance minister. Miyazawa, 78, is respected by many as an economics expert and is an architect of the government's plan to fix its debt-laden banking system.

Miyazawa pledged to open up the long-protected industry to competition that experts say will weed out the weaker companies.

"It will be inevitable for unhealthy banks to close," Miyazawa told state-run NHK television Friday.

Japan's banks are struggling to write off a growing burden of loans that are bad or at risk of default because of a long slump in the nation's real estate market.

While the government estimates that problem loans total $535 billion, others say it may be twice that.

Obuchi's predecessor, Ryutaro Hashimoto, was forced to resign after his party suffered a humiliating defeat at the polls earlier this month. The vote was widely seen as a referendum on the LDP's handling of the economy.