Not only does the Fiscal Investment and Loan Program — the government’s “second budget” — need to be trimmed but it also needs to sever its financial life support to problematic entities such as the Japan National Railways Settlement Corp., an advisory body said July 23.

An interim report released by a special panel under the Fund Operation Council, an advisory body to the finance and posts and telecommunications ministers, said a further whittling down of the program, dubbed “zaito,” was necessary to match the government’s fiscal reconsolidation efforts.

The panel said the general zaito program needs further trimming in the fiscal 1998 budget, the compilation of which will start in earnest after individual ministries and agencies submit their budget requests next month. The program came to 39.33 trillion yen in the current fiscal year, down 3 percent from the initial budget levels of the previous year.

However, no numerical targets to achieve the proposed reduction were set as panel members said the program is too complicated and crowded with institutions to calculate a target figure. The paper also said that fresh loans to the JNR Settlement Corp. and the National Forest Services Special Account should be terminated in fiscal 1998, in light of criticism that the loans were only turning sour and snowballing.

Funds should instead be limited to projects that cannot be fully financed by the private sector and that can pay off the loans, the panel said. A system by which the future costs of a project can be analyzed should also be established, it said.

The panel is to resume debate in the fall, with a final report due by year’s end when the Finance Ministry drafts the fiscal 1998 state budget. Finance Minister Hiroshi Mitsuzuka said his ministry would respect the report and work toward reducing the size of the program but gave no details as to how much that reduction would be.

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