A Lower House ad hoc committee passed a top fiscal reform bill Wednesday that would set a target for deficit reduction and place a ceiling on key budget items.
The bill is regarded by the government as the most important piece of legislation in the current extraordinary session of the Diet, due to end Dec. 12. It won a majority endorsement from both the ruling Liberal Democratic Party and the Social Democratic Party. New Party Sakigake, the LDP’s other small ally, has no representation on the committee.
Under the bill, the government would be obliged to cut its fiscal deficit to 3 percent or less of gross domestic product by fiscal 2003 and terminate the issue of deficit-covering bonds by that year. It is expected to get the full approval of the Lower House during a plenary session today. It will then go immediately to the Upper House for further action.
However, enactment of the bill could be delayed until sometime in December, because of overseas trips scheduled for Prime Minister Ryutaro Hashimoto and deliberation on other key bills.
The opposition is stepping up its fight against the legislation, arguing that it could slow down an already sluggish economic recovery. All opposition forces, including Shinshinto, the Democratic Party of Japan, the Japanese Communist Party and the Taiyo Party, oppose the bill. They charge that it only caps key areas of annual budgets and won’t lead to structural reform of the nation’s ailing coffers.
The bill would force the government to reduce its public works expenditures for fiscal 1998 by 7 percent and cut official development assistance by 10 percent from fiscal 1997 levels. It constitutes an important part of Hashimoto’s policy pledge to rescue the nation’s finances from debt.
As of fiscal 1997, the combined fiscal deficit of the national and local governments is estimated at 5.4 percent of GDP, and 7.47 trillion yen worth of new deficit-covering bonds was issued for the current fiscal year. To meet the fiscal 2003 targets, the government would have to slash deficit-covering bond issues by an average of 1.25 trillion yen a year.