By Graham Earnshaw, Reuters
TOKYO, July 6, Reuter – Japanese Prime Minister Yasuhiro Nakasone today presented a supplementary budget aimed at meeting Western demands for a boost in local spending and called on parliament to approve it quickly.
Nakasone, addressing the opening of a special parliamentary session called to pass a 2,070 billion yen (13.9 billion dollar) budget, also called progress on tax reform “absolutely imperative.”
Earlier this year, Nakasone was forced to back down on a sales-tax proposal due to popular opposition.
The supplementary budget is an important part of an economic package that Nakasone unveiled just before the Venice summit meeting last month to head off criticism of his country’s huge trade deficit with the rest of the world.
In a “state of the nation” address, Nakasone said he hoped the new budget would help boost Japan’s domestic economy and help ease such problems as unemployment, which reached a post-World War Two record of 3.2 per cent in May.
“While the Japanese economy is basically sound, there is a continuing sense of malaise centering on the manufacturing sector and the employment outlook remains grim,” he said.
Much of the money to be spent on public works and other investments under the supplementary budget will be raised through the sale of the government’s shares in Nippon Telegraph and Telephone, Japan’s largest telecommunications organisation.
The share sale plus a controversial proposal to tax small savings deposits in banks are also on the agenda for the 65-day parliamentary session, which opened today.
“We need to effect a radical reform of the tax system, including reviewing the ratio between direct and indirect taxation, reforming the tax exemption for (interest of small savings deposits) and making the tax system more equitable,” he said.
Political analysts said Nakasone appeared to want to set tax reform on course before leaving office in October by pushing through the savings deposit tax.
He said Japan must push ahead with restructuring its economy, making it less export-orientated, to avoid worsening friction with its trading partners.
“Economic restructuring is an important issue and one that must be actively promoted if the Japanese economy is to develop in harmony with the world economy,” he said.