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Prime Minister Ryutaro Hashimoto on July 8 outlined basic rules for fiscal 1998 budget requests that include three special spending brackets to channel 550 billion yen into key areas as well as roughly 240 billion yen in general expenditure cuts.

Hashimoto said at the day’s Cabinet meeting it is important to reduce the government deficit while ensuring that the necessary money is there to support reform of the nation’s economic structure. “Special adjustment measures” to direct funding toward such strategic sectors as environmental protection, scientific research and telecommunications will total 150 billion yen.

In addition, two special brackets were set up to encourage more public works spending to “improve distribution,” namely construction of expressways and other transport infrastructure, and “raising the quality of life,” including sewer systems and urban redevelopment. The distribution bracket will get 150 billion yen while the quality of life area will receive 250 billion yen.

The items in these brackets will be adjusted through the prime minister’s secretariat, rather than the Finance Ministry, according to government officials, in an apparent effort to show that Hashimoto is taking a strong hand in the budget compilation. Finance Minister Hiroshi Mitsuzuka said he hopes individual ministries and agencies will keep in mind the country’s precarious fiscal situation when they submit budget requests.

With one of the worst deficits in the industrialized world, Japan has set a goal of reducing the imbalance to no more than 3 percent of gross domestic product by fiscal 2003, with the 1998 budget to be the first step. The ministries have until Aug. 31 to hand in their funding demands to the Finance Ministry. The requests will be screened and whittled down by December.

Trade chief Shinji Sato said the Ministry of International Trade and Industry plans to ask for a budget that would carry out economic structural reform, which he said is necessary to maintain the nation’s vitality amid fiscal reform. “Fiscal reform is absolutely necessary, but if we concentrate only on that, it will have a (negative) impact on the economy,” he said. “We need to place emphasis on policies that revitalize economic activity.”

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