December 11, 1998

Kiyoshi SASAMORI
General Secretary
Japanese Trade Union Confederation (JTUC-RENGO)

1. On December 11, the House of Councillors approved and enacted a third supplementary budget for FY1998, through a majority vote of the ruling Liberal Democratic Party, the Liberal Party and the New Komeito. The total expenditures in this budget amount to ¥5,676.9 billion, including ¥3,900 billion for public works, centered on optical fiber networks and other information-telecommunication infrastructure, ¥2,100 billion for measures to cope with the credit crunch, such as expanded credit guarantees for small and middle-sized companies, and ¥769.8 billion to cover the cost of shopping vouchers, which will be distributed to families with young children and elderly members by municipal governments.
   
   
2. The Japanese Trade Union Confederation (RENGO) has been urging the government and relevant political parties to implement three key measures, starting from January 1999, to encourage economic recovery and the stabilization of employment: (1) tax reductions and various benefits worth ¥10 trillion; (2) public works, focusing on livelihood support and welfare areas, amounting to ¥10 trillion in terms of real fiscal spending; and (3) employment measures to create one million new jobs.
   The third supplementary budget includes measures intended to curb any further deterioration of the Japanese economy and the continuing credit crunch resulting from banks' reluctance to provide new loans. The budget does incorporate large-scale measures to cope with the credit crunch, but is utterly inadequate as a policy effort aimed at turning the economy around. The reasons are as follows: (1) Income tax cuts to help stimulate personal consumption and policy area-specific tax reductions have been put on the back burner; (2) the budget's outlays for employment measures, including special account spending, amount to just approximately ¥300 billion, and the government has failed to come up with a job-creation initiative giving specific target numbers; and (3) the public works expenditures are far from sufficient in such areas as welfare, education and the environment.
   
   
3. The Japanese economy remains mired in negative growth and in fact is perched on the brink of a deflationary spiral. Household consumption, housing investment and corporate capital spending are all shrinking as a result of financial system's problems, concerns about the uncertain future of Japan's social security system, and a growing sense of job insecurity. In order to climb out of the serious recession, it will be crucial to wipe out concerns regarding employment, rebuild the credibility of the social security system, and increase disposable income to rev up consumption and housing investment and thus stimulate domestic demand.
   
   
4. To achieve this goal, the specific policy measures advocated by RENGO must by all means be adopted and implemented from January 1999. They should include ¥4 trillion in individual income tax cuts, ¥4 trillion in allowances for children and the elderly, ¥2 trillion in housing and other policy area-specific tax reductions, and a program for creating one million new jobs. RENGO strongly urges the government to quickly compile and implement a fourth supplementary budget incorporating these specific measures designed to stimulate a recovery in consumption and to create new jobs. RENGO will also call on the government to compile a FY1999 budget that is larger than that of FY1998, plus supplementary budgets which are stimulative and powerful enough to refloat the Japanese economy.