TOKYO -- As the nation's economy falters, the Bank of Japan cut its discount rate an unusually sharp three-quarters of 1 percent today, one day after the nation's Cabinet announced a $38 billion economic stimulation package.
But most private economists said the steps would do little to reverse one of the most drastic economic slides Japan has experienced since World War II.
The stock market, where traders had long waited to see whether the government and bank could reverse the decline, responded by falling even faster.
The exchange's most-watched index, the Nikkei 225, which closed at a five-year low yesterday, had fallen an additional 623.35 points by the opening minutes of today's afternoon session, to 18,722.60.
Yesterday was the Nikkei's first close below half of the peak reached on the last trading day of December 1989, when the nation's "bubble economy" began deflating.
Masaharu Yoshitomi, an economist for the Economic Planning Agency, said the Cabinet plan and the Bank of Japan rate cut would help reach the 3.5 percent growth target Prime Minister Kiichi Miyazawa agreed on during President Bush's visit here in January.
Private research institutions and bank analysts scoffed at that idea. They have been forecasting growth well under 2.5 percent, and a few have begun to forecast decline for the coming fiscal year. Their forecasts already assumed steps comparable with those announced yesterday and today.
The Economic Planning Agency announced last month that the end of 1991 was Japan's first quarter of decline since the mid-1980s.
Mr. Bush had hoped that a dramatic revival of growth in Japan would absorb U.S. exports and help breathe election-year life into the sluggish U.S. economy.
The Cabinet's economic package consists mainly of speeding up public works spending, by the government and by utilities and quasi-public corporations.
The $38 billion represents the total increase in public works spending for the first half of fiscal 1992, which begins today, over the comparable period last year.
Apparently anticipating economists' criticisms that the package would have limited impact on economic activity, the Cabinet issued a statement saying its main goal was to keep the slowdown from "greatly cooling off corporate psychology and exerting a bad influence."
The interest rate cut was the fourth and largest since Yasushi Mieno, governor of the Bank of Japan, reversed course last spring and began to reduce rates. It trimmed the rate the central bank charges banks to 3.75 percent. The three previous cuts had been half a percentage point each.
Mr. Mieno targeted "asset inflation" on the Tokyo Stock Exchange and in Japan's real estate markets soon after taking office in 1988, steeply raising interest rates throughout 1988 and 1990.