- The Liberal Democratic Party (LDP) announced "The Emergency
Policy Package to Stabilize the Financial System" on December
16, last year.
- The LDP put together a concrete plan of the "Support for
Recapitalization of Financial Institutions" in the above
policy package on December 24, last year, and a mutual "confirmation"
was agreed upon by the three parties in the Coalition.
[Highlights--Measures to Stabilize the Financial System]
i) To ensure the protection of deposits in full, sufficient amount
of funds will be made available for the Special Account in the
Deposit Insurance Corporation of Japan (DIC).
ii) To recapitalize financial institutions, the New Account for
Financial Crisis Management will be established so that it may
temporarily purchase, after a fair examination, preferred stocks
and subordinate bonds issued by a financial institution.
iii) To provide the above measures with financial basis;
a) government bonds of 10 trillion yen will be delivered to the DIC, and
b) government guarantees of 10 trillion yen each will be authorized to the Special Account and the New Account for Financial Crisis Management.
--> Thus, the DIC will have a total of 30 trillion yen available
for its use.
The government is now urgently preparing the bills incorporating
the above measures in line with the recent policy packages/measures,
so as to hand them in to the current Ordinary Diet Session.
- Strengthening lending capacity of financial institutions
-- Flexible approach to implementation of Prompt Corrective Action
(A grace period of one year, during which the issue of supervisory
orders will be suspended, will be given to those domestic banks
whose restructuring plans are deemed to be sufficient to bring
their capital adequacy ratio above the home-standard within one
year.)
-- Measures to address the capital adequacy ratio of financial institutions
(The evaluation method of listed stocks will be changed, disclosure
on market value will be enhanced, etc.)
-- Supporting the business activities of small- and medium-sized
enterprises as well as middle-ranked corporations through an appropriate
use of the Fiscal Investment and Loan Program
-- Making a sufficient amount of funds available by establishing new lending programs run by government financial institutions, etc.
FY 1997 : 11 trillion yen + guarantees of 1 trillion yen
FY 1998 : 11 trillion yen + guarantees of 2 trillion yen
-- > Thus, a total of 25 trillion yen will be made available.
(Note) It should be noted that financial measures are emphasized
within the Small Businesses item of the FY 1998 budget as well,
as seen in the cases such as the 10 billion yen allocated to the
Credit Guarantee Association.
In the light of current severe economic and financial situation,
every possible measure will be taken while the basic policy of
promoting the Fiscal Structure Reform will be maintained without
concession.
- Temporary Income Tax Reduction
(National and local tax; Tax Reform for FY 1997 and FY 1998) Approximately
2 trillion yen
- Reduction in Corporate Income Tax, Finance-Related Tax, Land Taxation, etc.
(National and local tax; Tax Reform for FY 1998)
Approximately 840 billion yen
-- Corporate Income Tax
The rate will be reduced below the level in the USA (to 34.5%).
-- Finance-Related Tax
Securities transaction tax and bourse tax will be
cut by half. (A review will be undertaken by the end of 1999 with
a view to abolish the securities transaction tax and the
bourse tax together with a reform of the taxation on capital
gains derived from transfer of securities.)
-- Land Taxation
Imposition of land value tax will be suspended for a reasonable
period of time, and the special tax treatment of capital gains
derived from transfer of land will be substantially reconsidered.
-- Personal Allowances (Permanent Reduction)
Allowance for specific dependent will be increased (from
530,000yen to 580,000yen).
- Addition of public works for disaster relief and other purposes
-- Necessary public works including those for disaster relief and other purposes will be added.
Approximately 1 trillion yen
(as the scale of the enterprise)
- Contract Authorization
-- Contract Authorization will be provided to facilitate smooth implementation of public works.
Approximately 1.5 trillion yen
(as the scale of the enterprise)