Other analysts questioned the extent of the consensus that the prime minister will be able to develop about the contents of an economic package. They note that some members of the LDP's two legislative allies, the Social Democratic Party of Japan and the New Sakigake Party, appear to be moving toward advocacy of a cut in personal income tax rates. Until now, policymakers have ruled out any fiscal policy changes that would compromise the objective of trimming the government's huge budget deficit. That is exactly what a cut in individual income taxes probably would do. Officials responsible for monetary policy were nearly as blunt in their interpretation of the tankan results as was Mr. Hashimoto.
Analysts see little that the central bank can do, however.
In fact, nominal rates on long-term government bonds briefly dipped in early October to 1.7 percent, said to be the lowest for any industrialized country in this century. Although Japan has minimal inflation, suggesting that real rates are nearly the same as nominal rates, even real rates are extraordinarily low. The latest tankan , together with Mr. Matsushita's comments, indicate that BOJ will be extremely reluctant to reverse its policy of low interest rates before next year, no matter whether data over the coming three or four months turn more positive. The Economic Planning Agency, in releasing its monthly economic report October 7, also was relatively downbeat about the economy. Insiders still maintain that the recovery continues, which would make the expansion nearly four years old.