But Will It Work?

Japan has been facing one of its most serious economic downturns since World War II, with the stock market trading at less than half its peak value of late 1989 and investors convinced that the government would do little to stop the slide. But last week officials announced an unprecedented $86 billion rescue package. Amounting to 2.3% of GNP, the bailout will increase public works programs, assist small- and medium-size businesses and provide tax incentives for industrial investment. The government also promised to ease stock-purchase regulations and help banks sell real estate they now hold as collateral on bad loans.

Investors quickly voted with their money to support the plan. The Nikkei stock average soared even before the details were announced, closing the week at 17,970.79 points, an 11% gain. But most economists remain skeptical. Said one: "The Nikkei is just being deceived. There remains a lot of uncertainty about what results the package will bring."