Japan Talks the Talk

TOKYO: At least Ryutaro Hashimoto knows the things to say. A day after formalizing plans to clean up Japan's ravaged banking system, the Japanese Prime Minister said he favored permanent tax cuts as the other half of a strategy to revive the moribund Japanese economy. "This was the other major step that the U.S. has been seeking on behalf of the entire region," says TIME Wall Street columnist Daniel Kadlec. "Cleaning up the bad debt allows banks to start lending to businesses again; tax cuts give Japanese people more money to start spending again."

Hashimoto's words had the desired effect: Trading in Tokyo ended on a yen surge against the dollar and a 200-point boost in the Nikkei index. But was this just electioneering -- Hashimoto made the crowd-pleasing comments at a campaign rally. The July 12 parliamentary election will be a referendum on how Hashimoto performed during this crisis. Unless his Liberal Democratic Party thrives in the election, Hashimoto's promises could turn out to be empty.