Hashimoto outlines reform plans

Hashimoto, who apologized for past policies, is seen as a centrist candidate

In this story: Platform thin on specifics Real choice among candidates Bank reform still hits opposition RELATED STORIES

By CNN's Alex Frew McMillan and wire reports

TOKYO, Japan -- Former Japanese prime minister Ryutaro Hashimoto said on Thursday he would legislate a 200-day economic reform plan if elected.

Hashimoto's remarks came as the four candidates for the presidency of Japan's dominant Liberal Democratic Party (LDP) threw their hats in the ring for the April 24 election.

Hashimoto's proposed measures include setting an annual target for each financial institution to dispose of bad loans and possibly injecting capital into banks if needed.

"In order to revive the Japanese economy as quickly as possible, we will present measures to achieve 'new growth through structural reforms,' " Hashimoto said in a statement declaring his candidacy.

Hashimoto is the frontrunner to succeed outgoing Prime Minister Yoshiro Mori as LDP president. He heads the largest faction of the LDP.

Given the LDP's majority, the winner of the race almost certainly will become Japan's next prime minister.

Platform thin on specifics

Hashimoto's platform was greeted with muted optimism. Experts said it moved in the right direction but was thin on specifics.

"It's sufficiently lacking in detail that you can read into it what you want," said Richard Jerram, chief Japan economist for ING Barings.

Hashimoto, 63, who was prime minister from January 1996 to July 1998, also apologized Thursday for pushing reforms too quickly while in office.

His "Big Bang" bank reforms, coupled with fiscal tightening at the same time, were more than Japan's economy could handle and it slipped into recession. ''This was a mistake in judgment, and I can only apologize,'' Hashimoto said.

Hashimoto is now seen as a centrist candidate. His policies fall between LDP policy chief Shizuka Kamei, who favors an old-line approach driven by government spending, and the more-radical Junichiro Koizumi. Economics Minister Taro Aso rounds out the candidates.

Kamei said Thursday that the economy needs a supplementary budget and more public spending to recover. He has suggested a temporary cut in the sales tax, a move Hashimoto questions.

Real choice among candidates

For the first time in years, Japan's political picture offers real choice on economic reforms, experts say.

"Hashimoto is probably the least market-adverse choice," said Darrel Whitten, chief strategist at ABN Amro. "He's the most business as usual of the lot."

Whitten noted that Japan's stock market fell 20.5 percent during his previous administration, making him Japan's third-worst prime minister in terms of market performance.

But Japan's government is slowly moving in the right direction, he said, with a push from the Bank of Japan's steps toward quantitative easing.

Hashimoto's plan promises sweeping securities-tax reform to encourage stock ownership, including reducing capital-gains tax and allowing loss carryovers.

His call for annual targets for banks to write off loans are similar to an economic-stimulus package released April 6.

"This is mainly a confirmation in terms of what the market is already starting to discount," Whitten said.

Japan watchers welcomed the prospect of increased government support for the banks. With Thursday's statement, Hashimoto is the first politician to admit more government spending may be necessary.

But they remained skeptical the government would provide more capital support, as it did two years ago.

Bank reform still hits opposition

"The point is a lot of people in the LDP do not want [bank reform] to happen," said Marshall Gittler, Japan economist for Bank of America.

Gittler, like many experts, believes extra government spending is necessary to bail out Japan's troubled banks.

Many believe Japan's banks would go bankrupt if forced to recognize all the bad loans on their books. But Japan's economy will not turn around if the banks keep inefficient, effectively defunct companies in business.

Rural LDP politicians answer to strong corporate lobbies, especially in industries such as construction.

Those lobbies have exerted anti-reform pressure. If banks cleaned up their balance sheets, those industries would see bankruptcies and job losses.

As a result, reformers fear the candidates' efforts may sound positive but struggle to come to fruition.

"This is not an economic problem. This is a political problem," Gittler said.

Other countries have had bank crises and solved them. "What is unique here is the lack of political will to clean the problem up," he said.

Reuters contributed to this report.

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