Japan Coalition Partners Agree To Economic Package

JAPAN'S ruling coalition leaders yesterday appeared to have agreed to finalize a long-delayed economic stimulus package by today.

Leaders of the eight-party alliance are reported to have pledged to reach a compromise that would enable Prime Minister Morihiro Hosokawa to go to Washington for crucial trade talks with a reflationary, tax-cutting package under his belt. The coalition has been shaken by three days of political turmoil since Mr. Hosokawa's announcement on Feb. 3 of a new 7 percent value-added tax to finance income tax cuts. Hosokawa later agreed to set the proposal aside.

Party chiefs have been closeted ever since trying to hammer out a compromise that would rescue the stimulus measures and ensure that Hosokawa is not humiliated during his meeting with President Clinton on Friday. Hosokawa needs to be able to show Clinton the package and a draft budget for the fiscal year beginning in April to prove Japan's willingness to meet US demands for it to boost spending, encourage more imports, and help slash its huge trade surplus.

The coalition leaders said they would urge Hosokawa to include planned income and other direct tax cuts in the antirecession package he must announce by mid-week.

With the idea of a value-added tax seemingly discarded for now, however, it was unclear how the government would finance the tax cuts, expected to total $55 billion.

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