Japan Opens the Vault

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NEW YORK: Though the $16 billion tax cut Prime Minister Ryutaro Hashimoto handed out today was for Japanese citizens only, for marketeers it was a Christmas gift heard 'round the world. The Nikkei went up. The Hang Seng went up. South Korea's markets rose too. And in the U.S. (though the Dow was slightly down for other reasons), investors who see Japan as the West's last firewall against the Asian mess, there was an audible sigh.

"I think it's a good sign," says TIME Wall Street columnist Daniel Kadlec. "Everyone was waiting for some realization on Japan's part of its own troubles. Now, for Hashimoto to throw more public funds into the economy--that's no small gesture."

"What Japan really needs is an S&L bailout," Kadlec says, "like the U.S. had in the '80s." Hashimoto inched toward that this week, earmarking $77 billion in special government bonds for struggling banks. That's $20B more than the IMF will give South Korea. But after the money is spent, Japan's corrupt internal economic bureaucracy will remain. Those reforms, which Hashimoto promised when he was re-elected last year, have been slow in coming.