The LDP's objectives in dealing with bad loans are more ambitious than were those of the Bush administration or the Congress. The American effort was focused primarily on protecting the interests of depositors. Even if Japan's bad-loan problems were not larger relative to the economy than the troubles in this country of almost a decade ago, the added burden has the potential of making the government's financial commitment far bigger. Moreover, unlike Mr. Bush, Mr. Obuchi will inherit an extraordinarily weak economy. In FY 1997, which ended March 31, price-adjusted gross domestic product preliminarily declined for the first time since Mr. Miki's administration.
Recent data are no more encouraging.
For example, department store sales fell in June by 4.9 percent from the year-earlier level, suggesting that consumers remain extremely wary. Exhibiting a politician's instincts rather than those of a bureaucrat, he downplayed the Ministry of Finance position that relates cuts for high-income taxpayers to increased taxes for those in lower brackets. Finally, he called for the suspension of the Fiscal Structural Reform Act of 1997, which mandates diminishing government budget deficits over time. The devil in all these proposals will come in their details and timing. Some analysts suspect that the cut in income taxes will be linked to an eventual increase in the consumption tax.