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Japanese Economic Recovery Package Revieves Cool Reception - 2002-11-01

Credit rating agencies and analysts express disappointment in Japan's watered-down plan to revive the economy and clean-up the ailing banking sector.

After weeks of wrangling, Tokyo unveiled the long-awaited package. It includes more stringent accounting standards and tougher supervision of the country's banking sector, which is saddled with an estimated $423 billion in bad loans. Fitch Ratings, an international credit ratings agency, calls the plan extremely vague and criticizes the lack of a timetable for implementation.

An analyst from one of the largest U.S. banks, Citibank, says that the proposal leaves as much uncertainty as it clears up. An economist from the investment banking group Brown Brothers Harriman notes that the proposal leaves open the possibility of government bank takeovers, but says such an outcome is not guaranteed.

There was even some criticism of the package from lawmakers within the ruling Liberal Democratic Party. Using a Japanese proverb to make a point, legislator Yoichi Masuzoe said the package lacks concrete details. The latest reform package comes 20 months after Prime Minister Junichiro Koizumi swept to power on a pledge to overhaul Japan's troubled economy.

Japan's unemployment rate stayed unchanged for a fifth straight month at 5.4 percent in September, hovering just below the postwar high hit in December last year. Also underscoring Japan's economic woes, industrial output shrank 3/10th of one percent in September from a month earlier.

Despite these difficulties, some Japanese companies report healthy half-year results, including two major automakers.

Toyota, number one in the industry, says its net profit surged 90 percent to a record $4.5 billion dollars from the previous year. It attributes that to strong sales in the United States and a long-awaited recovery in its European operations.

Japan's second largest car manufacturer, Honda, also had record earnings. It earned $1.6 billion in the first half, up 12 percent from the same period last year. Like its rival, Honda says better sales in overseas markets and favorable exchange rates are behind the improvement.