The Abe Cabinet on June 14 adopted two sets of economic policy papers — the economic growth strategy and the basic policy of economic and fiscal management. It plans to achieve average growth of 3 percent in nominal terms and 2 percent in real terms for the coming 10 years. It also plans to post a surplus in the primary balance — a gauge to show how much policy-related spending is covered by tax and other revenues independent of bond issuance — by 2020.
But the growth strategy lacks a focus because it is primarily a wish list of projects for which individual government ministries want to get budgets as part of the “Abenomics” agenda. The government’s plan to achieve fiscal health also fails to show concrete ways to attain it.
The basic policy of economic and fiscal management says that spending on social security and public works projects as well as local government finances will be strictly reviewed. But big spending on public works projects, included that in the fiscal 2012 supplementary budget enacted under the Abe administration — the second largest supplementary budget ever — will enlarge the nation’s financial deficit.
Massive public works spending is one of the Abe administration’s “three arrows” in its growth strategy. The government should prevent snowballing of public works spending by giving priority to repairing aging infrastructure that could present a hazard. It must work out policy measures that will help enliven local economic activities without relying on large-scale public works projects.
For the sake of attaining national financial health, it will become necessary to make social security efficient. But this should not lead to weakening or destroying the security net for people who really need support from the public sector. Deplorably, the Abe administration has submitted a bill to the Diet to make the application process for receiving livelihood assistance difficult. Such a policy will make it difficult for low-income families to escape poverty, thus weakening the Japanese economy as a whole. The government should instead focus on eliminating the wasteful use of resources in the medical field.
As part of its growth strategy, the Abe administration is pushing for the restart of nuclear power plants and the export of nuclear power plant technology. But this is irresponsible in view of the ongoing Fukushima nuclear crisis and the lack of technology to safely store radioactive waste. The administration is attaching importance to deregulation, but the government must make sure that it would lead to more employment and increases in workers’ wages. It also should not use deregulation as an excuse to disregard people’s safety or to destroy the environment.
In an effort to win in the coming Upper House election, the Abe administration will draw a rosy picture of the Japanese economy. It is important all the more for people to carefully consider whether the administration’s economic policy has substance that will enhance their well-being.