2. Bring the Japanese economy to a full recovery.

(Current Issues)

Sticking to the approach of placing quantitative restrictions on fiscal spending, Japan's debts have indeed decreased, but the cost has been a decline in the income of Japanese citizens. Disregarding the principle that financial health is achieved based on the relationship between the denominator (national income) and the numerator (debt), the current Administration has succeeded only in worsening the economic situation further.

(Specific Solutions)

When the private sector lacks energy, the government should increase public spending. Government bonds representing 10 trillion yen in real money and 40 trillion yen in business scale should be issued to expand domestic demand. For the foreseeable future, debts will grow, but this initiative will result in better economic conditions, increase national income and bolster tax revenue. If the government refrains from apply the brakes for five years, the number of newly issued government bonds will decline naturally, thanks to higher tax revenue. We should view public works as essential initiatives that improve people's lives and protect the environment. Armed with that understanding, we should not allow public works that fail to meet these objectives, and we should have the courage to discard those works that are wasteful (Note 1) and being building the social capital and living environment we need to revive cities and regional areas. These initiatives should include: The construction of an airport that will serve as an international hub; Turn clogged urban crossings into tunnels; Bury electric wires and lay high-speed fiber optics in multipurpose underground conduits: Increase the prevalence of flush toilets in farming and fishing villages; Eliminate the tolls on expressways; Build high-standard roads; Prevent harm to the natural environment caused by development; Revive forests and improve rivers so that we can enjoy healthy, flowing streams.

Note 1:	After assuming office as Minister of Construction, Shizuka Kamei terminated four dam projects starting in fiscal 1997. Further, in his fiscal 1998 budget request, he terminated or suspended 18 dam projects.

	After becoming chairman of the Liberal Democratic Party's Policy Research Council, Kamei decided to terminate the Nakaumi reclamation project, even though it was almost complete. In addition, Kamei was responsible for the review and termination of 223 other public works, worth 2,800 billion yen.

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(Current Issues)

(1)	The introduction of the American-style payoff system and the accounting policy of value shareholdings at market rates have further accelerated deflation.

(2)	In addition, the banks' credit crunch and credit withdrawal resulting from the strengthening of capital adequacy requirements has been driving good small and midsize businesses into bankruptcy. More than 30,000 people are committing suicide each year. Bankruptcies of even listed companies are at a record high.

(3)	Pursuit of the disposal of bad loans without economic growth has led a vicious cycle in which all of Japan's assets have turned into bad loans, and these assets, dumped at fire-sale prices, are being snapped up by foreign capitals.

(Specific Solutions)

(1)

With the indefinite postponement of the introduction of the payoff system, the accounting policy of valuing shareholdings at market rates, and the accounting system requiring a company to post losses on valuation of assets in its financial statements, we'll focus on eliminating deflation first. When that is done, we'll introduce only those measures that are appropriate for Japan.

(2)

The capital adequacy ratio of regional financial institutions will be kept at the current level for the time being. Loan examination manuals that reflect the current state of small and midsize companies will be developed. The security program for small and midsize companies will be expanded and improved, specifically involving the introduction of a five-year debt moratorium.

(3)

By expanding the investment tax cuts, we will promote capital spending and investments in research and technological development. By prohibiting the forced disposal of bad loans, corporate bankruptcies will be avoided and employment protected.

By introducing the above economic policies, Japan will shift from a negative growth track to a positive growth track, and the real economy will return to growth.

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