West urges Japan to act to stem crisis in Asia

Western governments called on Japan yesterday to take further action against the economic crisis sweeping Asia.

Ministers from the 29-member Organisation for Economic Co-operation and Development, meeting in Paris, welcomed the economic stimulus package launched by the Japanese government on Friday as a step in the right direction.

However, they added that Japan should do more to boost domestic demand.

Meanwhile, Japan's financial markets gave the thumbs-down to the spending package unveiled by the government despite the official promises it would turn the struggling economy around. Investors drove down Tokyo's stocks and the yen fell in disappointment at the lack of much wanted permanent tax cuts.

The key Nikkei index fell below the 16,000-point level shortly after the market opened, closing 361.29 points or 2.3 per cent lower at 15,649.95 points. Japan is seen as the key to a turnaround in the region's fortunes.

Michel Camdessus, managing director of the International Monetary Fund, said: "We would like temporary tax cuts to be properly complemented or substituted by more permanent measures."

Japan announced a tax cut spending plan valued at 16.65 trillion yen, including 4 trillion yen in temporary income tax cuts and 7.7 trillion yen in public works spending.

In the wake of the package, Koji Omi, Japan's economic planning agency minister, told his OECD counterparts: "Because it is a matter of confidence, positive evaluation by yourselves and the international community is essential."