passed tax reform legislation that will extend FY 1994 income tax cuts totaling yen 5.5 trillion ($55 billion) through FY 1995. A "permanent" portion of the income tax cut (yen 3.5 trillion/$35 billion) will continue thereafter. The remaining "temporary" portion (yen 2 trillion/$20 billion) of the tax cut is currently scheduled to be dropped after 1996, but may be dropped at the end of 1995. To offset the tax cut, beginning in April 1997, the consumption tax (a value-added tax) is to be raised from the current rate of three percent to five percent. In addition, the government announced a new public works investment program totaling yen 630 trillion ($6.3 trillion) that will run from FY 1995 through FY 2004 ("Country Commercial Guide" 54).
In order to ease credit conditions, the Bank of Japan lowered the Official Discount Rate (ODR) seven times between mid-1991 and September 1993, from 6.0 percent per year to 1.75 percent, a record low. Nominal interest rates set new record lows during 1994; yet demand for funds, particularly for in
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