Japanese Industry Likely To Get Incentives To Restructure

In a move that should eventually improve the competitiveness of Japanese companies, tax incentives targeted on restructuring appear to be in the offing. They'll be the focus of a new industrial competitiveness council launched by Prime Minister Keizo Obuchi of Japan this week. The council aims to spur reforms to pare back chronic oversupply in Japanese industry. "In order to get the economy on a self sustaining recovery track, the time has come not only for demand-side measures, but also for grappling with reforming the supply side," Obuchi says. The council will work on ways of providing tax incentives for companies to eliminate excess plant and equipment through debt for equity swaps with banks. In exchange for shares in the firm, banks would forgive debt. The government's move comes as economic data show that Japan's economic recession is far from over. Unemployment is now at 4.6%, about double Japan's usual rate. Industrial production in February, the most recent month for which statistics are available, fell 0.6% from its January mark. And, separately, a poll of 13 Japanese research institutes forecasts an 0.8% decrease in GDP this year -- in contrast to the government's projection of 0.5% growth.