The Liberal Democratic Party and its two non-Cabinet allies came up with several budget-paring measures June 2, one day before a key fiscal reform report is due out.

Officials from the LDP, the Social Democratic Party and New Party Sakigake agreed to curb growth in social security spending during fiscal 1998 to 300 billion yen — instead of the originally expected 800 billion yen, sources said.

They also agreed to cut public works spending between fiscal 1998 and 2000 for a total of 15 percent the fiscal 1997 level, the sources said.

The prime minister’s staff wants to implement a reduction of 7 percent in fiscal 1998 from the previous year’s level, 5 percent in fiscal 1999 and 3 percent in fiscal 2000 while the Construction Ministry wants a reduction of 5 percent each year, the sources said. Hashimoto will make the final decision, the sources said.

The three parties discussed numerical targets for fiscal reform to be incorporated into the final report of the Conference on Fiscal Structural Reform, which is chaired by Prime Minister Ryutaro Hashimoto. The final report is scheduled to be announced June 3.

There was still some squabbling over defense allocations. The LDP and the Defense Agency were negotiating the size of the cut to be made to the fiscal 1996-2000 middle-range defense buildup programs. The size of the cut is likely to be between 800 billion yen and 1 trillion yen during the period from fiscal 1998 through 2000, the sources said.

LDP policy chief Taku Yamasaki was calling for a cut of more than 1 trillion yen, while Defense Agency chief Fumio Kyuma was saying that a cut of 600 million yen is the most the agency can accept, the sources said.

The three parties also agreed to decrease official development assistance to developing countries for fiscal 1998 by 10 percent from the previous year.

In addition, the period in which a 6.01 trillion yen agricultural budget designed to help farmers cope with liberalization under the Uruguay Round trade talks will be extended. The original period, fiscal 1994-2000, will be prolonged to 2002 so that per-year spending can be reduced, the sources said.

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