Prime Minister Shinzo Abe has declared that he will scrap the ¥19 trillion cap the Democratic Party of Japan government had set on the reconstruction budget for areas devastated by the 3/11 triple disasters. He is intent on boosting the image of his administration and the Liberal Democratic Party before the Upper House election next summer.
But his policy is fraught with problems. Mr. Abe appears to think that simply boosting the size of the budget will ensure the reconstruction’s smooth progress, but the record so far suggests otherwise.
For fiscal 2011, ¥14.92 trillion was allocated for use in reconstruction-related projects. But ¥5.87 trillion or 39.4 percent was not used by the end of fiscal 2011 on March 31.
The DPJ government at the time decided to carry ¥4.76 trillion or 32 percent over to fiscal 2012, and not use the remaining ¥1.10 trillion or 7.4 percent. It is extremely regrettable that about 40 percent of a budget intended to help municipalities and residents severely hit by the disasters was left unused.
This was largely the result of the central government’s failure to set up a system to smoothly process local government requests for budget money to fund community-resuscitation projects, and to disburse requested money in a timely manner.
Many disaster-hit areas were also unable to use all the money that they had received from the reconstruction budget due to attached conditions or a lack of resources, such as construction workers and engineering officials to supervise work, and were forced to carry forward the unused money to the next account.
Reacting coolly to Mr. Abe’s declaration, an official of a municipality in Tohoku said, “We have not yet reached a stage in which an increased budget will instantly translate into real reconstruction.” One can’t help wondering whether Mr. Abe really understands the situation at the local level.
Last year it was found that the reconstruction budget was also used to fund numerous projects outside the disaster areas. Despite criticism, ministry requests for the fiscal 2013 reconstruction budget still include dubious projects because the LDP demanded that money from the budget also be used for disaster-prevention projects outside the disaster areas.
It also recently surfaced that the work to clean up areas contaminated with radioactive substances from Tokyo Electric Power Co.’s Fukushima No. 1 nuclear power plant is being carried out in a slipshod manner that ignores rules to prevent secondary contamination. It appears that large construction companies have been favored over small firms with better technology.
One wonders whether the government has the will or the ability to properly manage the cleanup work.
Out of the ¥19 trillion budget cap, the government has already earmarked about ¥17 trillion for reconstruction purposes. The Abe administration’s economic stimulus package also includes ¥1.6 trillion for the same purposes. Income, corporate and resident tax raises will cover ¥10.5 trillion of the ¥19 trillion.
If the Abe administration scraps the cap, it may have to rely on bond issuance. This may weaken trust of state finances and lead to a rise in long-term interest rates.
People and opposition parties must scrutinize the reconstruction budget for fiscal 2013.