Japan Aims Cash At Sullen Economy

The Japanese government rolled out an enhanced version of its much-discussed economic stimulus package Friday, pledging $127 billion to revive this country's faltering fortunes and ease the world's worries.

Sounds good. What does it mean to you? Plenty, here in the global economy.

Japan's doldrums have slowed Asia's recovery and caused nail biting in Washington, where government officials have pressed Japan to stimulate spending and cut taxes. A cynic might wonder why these officials don't cut America's taxes, but never mind.

If this package does help the world's second largest economy pick up some steam, it will indeed be good for Asia and will help shrink the US trade deficit, which has been swelling in recent months.

But it has to be said that there is a lot of skepticism about the chances of this happening, and not just from economists.

Yoko Matsumura, a Tokyo lawyer's assistant, already knows what she'll do with tax cuts - worth more than $30 billion over the next two fiscal years and the equivalent of several hundred dollars to her. "I'll save. I won't spend," she says, explaining that the economy is too shaky to do otherwise. "All Japanese must be feeling the same way."

So much for stimulating consumer demand.

It also has to be said that Japan's package serves the interests of Robert Rubin, the US Treasury secretary, and his partner in the management of the US economy, Federal Reserve Chairman Alan Greenspan.

By extension, it may also serve your interests.

The US economy is in great shape, but many have begun to worry that stock prices are running out of control. Deflating this bubble without messing up the real economy is tricky business. So is making sure that the ever-rising share prices don't inflate other prices, like those for food or that nice house on the corner.

If Japan were to rev up, it would strengthen an export market for American goods and alleviate pressure on the US, which now looks like the world's only real economic engine.

"They've got a real problem on their hands," says Ron Bevacqua, Japan economist at Merrill Lynch & Co., of Mssrs. Rubin and Greenspan. "What would relieve their tension would be to have an alternate source of demand in the global economy, and that has to be Japan."

Consider the trade deficit. Several years ago, American policymakers encouraged a weaker dollar to make US goods cheaper overseas and boost exports. That eased the deficit for a while.

Nowadays the US wants to maintain a strong dollar (it helps prevent inflation). How to lower the deficit? Push Japan to encourage Ms. Matsumura and others to spend. Call it have-your-cake-and-eat-it-too economics.