Coming at a time when domestic and overseas confidence in the immediate course and health of the Japanese economy is near a nadir, observers were watching closely for bold stimulative actions when the FY 1998 budget plan emerged from the final round of cabinet-level negotiations. While Mr. Hashimoto delivered on previous budget-related pledges, he disappointed those expecting major new initiatives. The consensus among economists in Japan seems to be that the proposed budget will be a washout when it comes to influencing macroeconomic factors.
Opinion is divided, however, on the budget's impact on consumer, investor and business confidence.
Science and education outlays, a priority, will be held essentially at FY 1997's level. Administrative and operating costs will be boosted 2.1 percent because of scheduled pay increases, despite plans to cut 3,700 people from the central government payroll. While the expected gain of 1.2 percent in total tax revenues seems attainable, experts argue that it could be a stretch since neither wages nor the economy as a whole is expected to grow that much. In addition, critics charge that it is unrealistic to expect consumers to buy more in the face of a weak economy, job uncertainties and a higher consumption tax rate, limiting the rise in consumption tax revenues. The overall impact of raising the cigarette tax and other relatively low-yielding taxes while cutting the securities transaction tax and other secondary taxes is being hotly debated as well.