The ruling Liberal Democratic Party endorsed a basic outline May 16 for capping government spending to help the nation regain its fiscal health, but left many specific numerical targets up to the prime minister’s Fiscal Structure Reform Council.
The council was expected to draft a report as early as next week that will attempt to curb growth in spending in all major sectors of the state budget, such as official development assistance, defense and public works outlays.
The government has a self-imposed target to reduce its fiscal deficit to levels of 3 percent or less of gross domestic product and to stop issuing deficit-covering bonds by 2003.
Support from LDP lawmakers, who represent various vested interests, has been considered a key factor in making this goal a reality.
Friday’s paper says deficit-covering bonds should be steadily reduced on an annual basis, and reaffirmed Prime Minister Ryutaro Hashimoto’s plan to keep policy-related spending for fiscal 1998 to a level below the current fiscal year’s initial budget of 43.8 trillion yen.
It said the 630 trillion yen Basic Plan for Public Investment, which runs till fiscal 2005, should be extended for about three years, and the time of completion for other related long-term public works plans also should be pushed back for two years.
For fiscal 1998, public works outlays should be reduced across the board, according to the LDP paper.
The 6.01 trillion yen in special projects to compensate for the liberalization of agriculture markets would remain untouched, but their completion date would be extended for two years.
Every effort should be made to cut back on defense spending for such items as general outlays and personnel expenses, the paper says.
It also says ODA spending should be whittled down and resources more strategically allocated.