An antideflation package put together last Thursday by the government and the Bank of Japan has disappointed everyone. Prime Minister Junichiro Koizumi himself has acknowledged that it includes "no quick remedies." A key policymaker in the ruling coalition has described it as a "patchwork of stopgap measures that offer nothing new."
Indeed, it's deja vu all over again. The package calls mostly for financial steps to reverse deflation, including speeding up bad-debt disposal, stabilizing the financial system, shoring up the stock market, and expanding bank lending. All these measures, supported by a further easing of monetary policy, amount to a rehash of earlier plans.
In particular, the package includes no specific measures to deal with ailing banks. One can only guess whether, or when, the government will inject public funds into weak banks to accelerate bad-debt write-offs. The plan says "every possible measure, including capital buildup," will be taken if and when a financial crisis looms, but it makes no mention of "public funds."