Japanese Won’t Soon Reap Benefits of Fiscal Package : Economy: With Parliament out of session for two months, inaction on controversial legislation leaves the country in limbo.

TOKYO —  The timing of the next session of Japan’s Parliament and a wrangle with opposition parties threaten to hold up passage of a huge government fiscal package until late this year, delaying its impact on the economy, analysts said.

The $85-billion package announced last week includes new public works spending, increased lending by government financial institutions and other measures to revive Japan’s sluggish economy and check a steep drop in stock prices.

Stocks had soared 26% over the past two weeks on investor enthusiasm over the package, countering a 23% drop from the start of the fiscal year in April. After a 415-point jump Friday, the Tokyo Stock Exchange’s Nikkei index rose again Monday, closing at 18,061.12 points, up 90.33 points.

But those gains may not hold when investors start to focus on the implementation of the plan, which still has to be passed by the Diet, Japan’s Parliament, analysts said. That could take until late November or December, analysts said.

“The stock market has priced in none of this,” said Geoffrey Barker, chief economist at Baring Securities.

The longer the package takes to pass, the longer it will be before the economy benefits, Barker said. Contractors don’t start new projects until four months after the government places new orders, he added.

Even if opposition parties agree not to tie debate on the package to other issues, it will still take about a month to pass the measures, according to an official of the ruling Liberal Democratic Party, who declined to be identified.

The opposition could link the bill to debate over a recent political scandal centered on donations made by a trucking firm to top LDP officials, analysts said. Shin Kanemaru, vice president of the LDP, resigned last week after admitting that he received $4 million in 1990 from Sagawa Kyubin, a Kyoto-based trucking company that contributed large sums to bureaucrats and politicians to help it crack the heavily regulated trucking business.

The bills to implement the rescue package must be passed by the Diet’s lower house, where the LDP has a majority, and the upper house, where it doesn’t. But the next Diet session won’t convene before late October when the emperor returns from an official visit to China. The emperor must declare the session officially open, and analysts said the Diet is unlikely to open before then.

That means passage would come at the end of November or the beginning of December at the earliest. As a result, the impact on growth for the current fiscal year ending March 31 will be minimal, analysts said.

Once the Diet is in session, the package could come under attack from the opposition, which is against plans to set up an organization to buy land from banks. It also wants a tax cut and objects to the sale of government bonds to finance new spending, said Shigenori Okazaki, a political analyst at SBCI Securities.

Prime Minister Kiichi Miyazawa said for the first time Sunday that he is ready to use public funds in a bailout of the banks.

In a speech, Miyazawa said the government will contribute to a private corporation to be set up later this year to buy real estate held by banks as collateral on bad loans. Banks need to get the land off their books in order to free up capital so they can increase lending and contribute to economic recovery. Miyazawa added that banks, in return for public funds, should disclose the size of their bad debts.

So far banks have not given a complete picture of their bad debts, and analysts estimate the amount at anywhere from $79 billion to $550 billion.