TOKYO -- Japan's Cabinet endorsed an $86.6 billion bailout plan yesterday, by far the biggest in the country's history, to deal with its worst economic and financial crisis since World War II.
The centerpiece is $69.6 billion earmarked for public works and other big-ticket projects. That pump-priming is meant to rebuild consumer spending in an economy where a deliberately induced slowdown has threatened to plunge into an uncontrolled downward spiral.
Parallel with the spending plan runs a radical government intervention to rescue the country's banks and stock markets, which flirted 10 days ago with levels many economists said could force a financial meltdown that would thwart attempts to revive the economy.
"This plan has two chief goals,"the Economic Planning Agency's Masaru Yoshitomi told foreign reporters last night. "One is to stimulate demand in the real economy, and one is to revive the financial markets."
The release of the plan's details was met with generally little reaction in markets around the world as stock prices in Europe and New York were pushed by economic forces closer to home.
Senior Japanese trade officials,under pressure from Washington to reassert control over rampaging export surpluses -- expected to be in the hundreds of billions of dollars this year -- said the plan also was adjusted to increase imports by $4 billion to $5 billion over the next 19 months.
Key to the financial markets' revival is an unprecedented and still-sketchy proposal to have banks organize a government-authorized bailout company. The company would buy land that the banks and affiliated loan companies accepted as collateral for hundreds of billions of dollars in lending that has gone unpaid since the overheated 1980s "bubble economy" burst in 1990.
The overall $86.6 billion price tag is equal to 2.3 percent of Japan's gross national product for fiscal year 1991, which ended last March. Mr. Yoshitomi estimated that in the 12 months beginning Oct. 1, the plan will add more than 2.4 percent of the 1991 total to the gross national product.
But Mr. Yoshitomi repeatedly refused to answer whether it would increase the fiscal 1992 GNP by the 3.5 percent that Prime Minister Kiichi Miyazawa promised to President Bush in January.
Aware that Japan's is the only big industrialized economy both politically and fiscally capable of large-scale pump-priming, Mr. Miyazawa promised Mr. Bush he would make his country "the engine of growth" to pull the world's economies out of the doldrums.
But Japanese officials have been slow to comprehend the force of their own country's slowdown.
Despite weeks in the drafting stage, yesterday's plan seemed to be hastily prepared and still far from complete in important ways.
When asked where so much money would come from, Mr. Yoshitomi said: "This is the expenditure side. The funding side will be determined by the Diet [Japan's parliament] in October."
Similarly, no one is yet saying who will run the bank-organized bailout company, how much it will spend or whose money would finance it. Officials say only that they hope it will be operating by year's end.
Yesterday's plan has been in preparation since the Economic Planning Agency (EPA) published its gloomiest-ever annual white paper five weeks ago. In that paper, the government said for the first time that the economic and fiscal crisis had gone far beyond what officials intended when they deliberately popped the "bubble" by jacking up interest rates in 1989 and 1990.
The plan's details began to leak to the public piecemeal, apparently by government design, soon after a series of ever-deeper six-year lows on the Tokyo Stock Exchange (TSE) galvanized officials two weeks ago.
The plan itself has expanded by billions of dollars almost every business day for a week. Its nominal value leapt another $14.4 billion overnight before final approval yesterday.
Leaks about its recurring expansion brought financial markets bounding back to life, at least for the past eight trading days.
On Aug. 18, the TSE's most-watched index, the Nikkei-225, closed at 14,309.41, its lowest in 6 1/2 years. Yesterday, it closed at 17,970.79.
That leap of 25.6 percent in a week and a half is comparable with what world stock exchanges did when the Persian Gulf War started.
The rally started Aug. 19 when news leaks about the government package forced a prolonged technical retreat by short sellers.
Thursday and yesterday, the market seemed to leap beyond the technical rally stage and into trading volumes rarely seen on "up" days in the TSE's 32-month bear market. An estimated 850 million shares changed hands yesterday and more than 600 million Thursday, compared with volumes well under 200 million for a typical 1992 day.