Packaged out

Article Abstract:

Japan has announced a fiscal stimulus package which has has little impact on the market, according to Alexander Kinmont from Morgan Stanley. Investors see that package as insufficient, and it is still a proposal rather than a bill. The package has been long expected, and follows a number of similar packages. Risks do appear to be contained, however, and the operating environment should improve in the second half of 1998. The Tax Reform Council is to issue a report in the winter of 1998, and this could help the market, especially if it encourages corporate restructuring.

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Has Mr Hayami read Keynes?

Article Abstract:

Japanese monetary policy has not helped boost the economy, and consumption has not been stimulated despite interest rates at less than 1%. This may be because of the liquidity trap which was studied by John Maynard Keynes during the 1930s. He proposed deficit financing, using fiscal, rather than monetary policy with the government spending more than its revenue. Such ideas may have become unpopular under former United Kingdom prime minister, Margaret Thatcher during the 1980s, but they appear to be appropriate for Japan in 1998.

Legislative Bodies, Budget, Keynes, John Maynard

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