IMF official: Worst over
for Asia, unless Japan
fails to act

Investors pin hopes on a new Japanese
economic stimulus package

Star-Bulletin news services

TOKYO -- An International Monetary Fund official said today the worst is over in the Asian financial crisis, but warned of troubles ahead if Japan fails to revive its economy.

"There are still possible shocks" threatening the fragile Asian economies, said Stanley Fischer, deputy managing director of the IMF. "One of those shocks is the decline of the Japanese economy."

Fischer spoke while visiting Tokyo, which has been criticized recently for not doing more to help the rest of Asia by rejuvenating its stagnant economy and increasing imports.

Separately, Japanese Prime Minister Ryutaro Hashimoto said today he will soon announce "bold" steps to do just that.

Hashimoto, who lets his lieutenants speak on most economic matters, will hold a special news conference tomorrow. The last time he did that, on Dec. 17, he announced a one-time 2 trillion yen ($15 billion) income tax cut.

The benchmark Nikkei 225 stock index rose as much as 2.9 percent today on expectations the prime minister will call for even larger tax cuts as part of a supplementary budget that could include up to 8 trillion yen ($60 billion) in new spending.

To accomplish that, Hashimoto and his ruling Liberal Democratic Party will likely have to amend the Fiscal Reconstruction Law, which limits new bond issues and caps public spending.

The law won't be formally changed until the next session starting in September, the Nihon Keizai newspaper reported.

Japan's economy, which alone accounts for some 80 percent of the goods and services produced in Asia, has languished ever since its over-inflated property market collapsed in 1992.

The IMF's Fischer said the best thing Japan can do is clean up once and for all the mess left by the real estate market's collapse: bad loans still on the books of Japanese banks. These loans total 76 trillion yen, or $571 billion, according to official estimates.