Prime Minister Keizo Obuchi bet his political life on rescuing the Japanese economy within two years with more than $111 billion in tax cuts and extra spending and a lifebelt for the finance sector yesterday.
"Looking squarely at the serious situation facing our country, I increasingly feel there will be no tomorrow for myself without having courage today," Mr Obuchi told parliament in his inaugural policy speech.
"By staking the future of the cabinet, I am determined to spare no effort to bring the Japanese economy back on track in one or two years," the 61-year-old premier said.
Tax cuts would far exceed six trillion yen ($42 billion) and extra government spending would total more than 10 trillion yen ($69 billion), he said.
The statement largely confirmed the new premier's earlier promises, although doubt had been cast on the need for the extra spending and the size of the tax cuts was vastly expanded.
Markets reacted coolly. The key Nikkei stock average finished the day with a loss of 47.05 points, or 0.3 per cent, at 15,829.17. The yen weakened against the dollar to 145.53-55 yen at 5.00 p.m. (0800 GMT) from 144.35 in New York late on Thursday.
A senior US Treasury official said Mr Obuchi's plan contained some "promising and constructive steps" but added that Washington hoped Tokyo would move quickly.
"The early restoration of growth in the Japanese economy is critical not only for Japan but for Asia and other emerging markets, and the world economy as a whole," the official said.
However, analysts were sceptical about whether the plan contained sufficiently drastic or specific measures to drag Japan out of recession, and they noted that Mr Obuchi said little about financial reform.
The priority for the economy, said Mr Obuchi, was drastic action to tackle the estimated 87.5 trillion yen ($621 billion) in bad debt plaguing the finance sector.
"I will tackle the matter of bad loans at financial institutions by keeping my mind primarily on measures to protect depositors and make the road to financial revival as short as possible," he said.
The finance sector was critical to Japan's health, said the prime minister. On taxes, Mr Obuchi promised permanent annual tax cuts "considerably larger" than the six trillion yen he had pledged in his campaign for the ruling party leadership and prime minister's post, which he assumed on July 30th.
"I will revise income taxes from January next year and corporate taxes from next fiscal year (starting April 1999)," he said, adding that related bills would be sent to the next ordinary parliament session in January.
