Industry minister Takeo Hiranuma on Wednesday called for compiling an extra fiscal 2002 budget in the ordinary Diet session in January in response to recent remarks by Prime Minister Junichiro Koizumi ruling out such a step in the upcoming extraordinary Diet session.
“I hope a supplementary budget will be compiled in the ordinary Diet session as the minister in charge” of supporting small and midsize companies, Hiranuma said.
Hiranuma also repeated his opposition to a type of local taxation based on a company’s size, rather than profitability, because it would place a larger burden on struggling small companies. The plan was proposed by the home affairs ministry.
“Introducing the taxes amid deflation should be considered more carefully,” he said. “Small and midsize companies are very much afraid of it.”
The minister overseeing the Small and Medium Enterprise Agency has called for an extra budget for the current fiscal year to shore up safety nets for small companies that may face further hardships if the government applies more pressure on banks to eradicate bad loans.
He cited estimates of a 600 billion yen deficit at Japan’s public credit guarantee system in the fiscal year through March 31 alone and further losses down the road that would have to be replenished.
“We can maintain the system for fiscal 2002 if we tap into reserves totaling 700 billion yen,” Hiranuma said. “But we need to strengthen safety-net guarantees for capable, vigorous and energetic small firms at the same time as accelerating the bad-loan cleanup.”
The public credit guarantee system for small and midsize companies is running a deficit because an increasing number of companies whose loans it has guaranteed are failing.
Calls for an additional budget are also mounting within the ruling Liberal Democratic Party and other parties, but Koizumi on Saturday reiterated that he has no plans to compile a supplementary budget in the upcoming extraordinary Diet session, which starts Friday.
Koizumi has prioritized fiscal discipline and promised to limit the issuance of fresh government bonds for the fiscal year to 30 trillion yen. But the prime minister has already he may break that pledge.