Hashimoto: Japan's problems underestimated


Hashimoto (R) says he supports the reform programs of Prime Minister Junichiro Koizumi (L)

TOKYO, Japan (CNN) -- Former Japanese prime minister Ryutaro Hashimoto has admitted that a previous underestimation of the severity of Japan's economic problems has pushed the country towards further economic deterioration.

Hashimoto, a staunch nationalist, said his administration failed to anticipate any problems in the economy, particularly in the banking industry, because they were misinformed about the severity of their problems.

"When I was appointed prime minister, the information we were given by the top management of the financial organization in Japan, particularly the information on the quantity and volume of non-performing loans, was undervalued," Hashimoto told CNN.

"And we started to plan the program on the basis of the information we received from them. Therefore, we were not able to put it behind us."

Hashimoto replaced Tsutomu Hata as prime minister in 1996 and resigned from in 1998 following a major Upper House election defeat.

He added that pulling Japan out of the economic doldrums would be a difficult feat, noting that the September 11 terror attacks in the United States have exacerbated Japan's economic problems, as well as the rest of the world's.

Consumption tax

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Hashimoto ruled out the possibility of rolling back consumption tax to boost consumer spending and lift the country's economy, instead suggesting the tax should be raised.

"I personally don't think there is a possibility because in the not so distant future, I think we would be forced to increase the consumption tax because of our concerns for the integrity of the Social Security System in the country."

Hashimoto pioneered the increase of consumption tax from 3% to 5% during his term, which also cost him popularity among his colleagues and constituents and is the underlying reason many analysts say he lost the leadership.

Economic woes


Japan's economic deterioration shows no sign of easing

The former prime ministers comments follow the release of figures Friday that showed Japan's economic woes were not easing.

The nation's unemployment rate rose to a record 5.4 percent in October, continuing the torrent of bad news for the world's second-largest economy.

The number of jobholders dropped 1.03 million from the previous month, with part-time male workers at manufacturing plants suffering the most.

Adding to the grim mood was data showing Japanese consumer prices continued to slide for the 25th straight month.

Japan's nationwide core consumer price index (CPI) fell 0.7 percent in October from a year earlier, underscoring prolonged deflationary pressure on the fragile economy.

The core index, which excludes volatile fresh food prices, was down 0.1 percent in October from the previous month.

Average spending by wage-earning households rose a real 1.6 percent in October from a year earlier, the first rise in seven months, but the government said the gain was due to special factors such as the timing of school payments.

Still hope

The politically sensitive jobless figure highlights the challenges facing Prime Minister Junichiro Koizumi, who has pledged painful but vital reforms.

But Hashimoto believes there is still be hope for his country, noting that the present administration now has a better grasp of the magnitude of the problem.

"I certainly support the reform programs of Prime Minister Koizumi. It is because he is following the same path that I have been trying to follow myself," he said.

Gross domestic product (GDP) figures for the September quarter are due to be released on December 7.

They will almost certainly show that Japan has joined the United States in recession, following the contraction in the June quarter.

Organizations such as the OECD and the International Monetary Fund have already predicted that Japan's economy will shrink this year by between 0.7 and 0.9 percent, and will continue to contract next year.