Proposal for Emergency Stimulative Economic Measures

Japan's economy is in the midst of an unprecedented crisis, with the third consecutive year of negative growth a very real possibility. Continuation of this situation will impact heavily on the world economy. We in the business world have been doing our utmost to jumpstart an economic recovery by boosting management efficiency, restructuring operations, and developing new business. But the Japanese people are showing a deep sense of unease about the protracted instability in the financial system and other uncertainties, and the real economy has taken a serious hit.

To overcome the economic crisis now facing Japan, open the way to a dynamic economy and society in the twenty-first century, and expand employment through industrial revitalization, the government needs swiftly to put into effect uncompromising measures; it must also initiate sweeping structural reform with an eye to the future.

We believe the following emergency measures are needed urgently to stimulate the economy. Our recommendations for sweeping structural reform have been compiled separately in our Proposal for the Economic Strategy Council.

Immediate decisions and action will be of the essence.

Recommendations

1. Further stabilization of the financial system

   • Carrying out a large-scale injection of public funds
   • Increasing lending limits for government financial institutions
   • Reforming the Credit Guarantee Corporations to expand their credit insurance framework, help them guarantee bonds issued by small and medium enterprises for private placement, and enhance their inspection capacities
   • Creating subcategories of self-assessed Class 2 loans and guidelines for reserve funds
   • Promoting information disclosure by individual financial institutions

2. Stimulation of the securities market

   • Dissolving cross-shareholding arrangements and implementing measures to facilitate the acquisition and disposal of own stock (establishment of an Institution for Sound Securities and Other Financial Instruments)
   • Reviewing securities-related taxation
     • Immediately eliminate securities-trading and stock-exchange taxes.
     • Reduce profit transfer tax on long-term stock holdings.
     • Eliminate double taxation on dividends.
   • Disposing of government-held stock
   • Strengthening the functions of the Securities and Exchange Surveillance Commission for monitoring suspicious stock price movements and the spread of rumors

3. Early construction of an international framework for stabilization of foreign exchange markets

   • Forging stronger linkages with developed countries and international institutions such as the International Monetary Fund
   • Strengthening monitoring of foreign exchange markets by governments in developed countries

4. Tax system reform

   • Moving up the schedule for reduction of the effective corporate tax rate to 40%
   • Promptly implementing additional income and residential tax cuts
   • Reviewing land and housing taxation (to be reflected in 1998 income tax)
     • Drastically increase effective period for housing acquisition promotion taxation
     • Reform income tax system to make housing loan interest exempt
     • Expand reductions and exemptions for housing-related registration and license, real estate acquisition, and special land-holding taxes
   • Developing a tax system that promotes business development, including the early introduction of consolidated taxation

5. Public-sector investment

   • Speeding up preparation of second supplementary budget
   • Developing urban and residential environments, developing infrastructure contributing to more efficient distribution, and concentrating on information-related public investment
   • Moving quickly to promote the Private Finance Initiative
   • Initiating the New Tokyo Area project

6. Development of industrial infrastructure to open Japan's path to the future

   • Redressing high-cost business structures
   • Promoting and developing new technologies

7. Reform of corporate pension systems

   • Abolishing special corporate taxes
   • Introducing defined-contribution corporate pension systems

8. Reform of the labor market

   • Expanding unemployment insurance
   • Completely liberalizing employment agencies and temp services
   • Providing support for workers' job skill development