Finance Minister Hiroshi Mitsuzuka voiced opposition Friday to recent calls to scrap the current classification divisions between construction and deficit-covering government bonds.Deficit-covering bonds are issued to cover gaps between government spending and revenue in a given fiscal year and require Diet approval through a separate law every time they are issued, whereas construction bonds have no such stipulation. Speaking at a regular news conference, the finance chief brushed aside the idea of eliminating the separation, saying it would threaten fiscal discipline and throw the government’s reform efforts off track.Prime Minister Ryutaro Hashimoto has already decided that 2 trillion yen in income and residential tax cuts will be financed through deficit-covering bonds in a supplementary budget for the current fiscal year, but many businesses and opposition parties are still unsatisfied. Both Hashimoto and senior government officials stress that the move was the best possible given the limits set by the Fiscal Structural Reform Law enacted during the last Diet session. The law calls for the government to stop issuing deficit-covering bonds and reduce the deficit to no more than 3 percent of gross domestic product by fiscal 2003.Koichi Kato, secretary general of the ruling Liberal Democratic Party, in an interview with a Japanese newspaper, suggested that the Public Finance Law be revised to eliminate the distinction between the two types of bonds, which would pave the way for using construction bonds to help finance items such as pump-priming tax cuts without conflicting with the law. But Mitsuzuka said that while there were some differences between the two types of bonds, such as the years for redemption, both were bonds that must be repaid by future generations. “It is most vital that the main points of the Fiscal Structural Reform Law be followed,” and doing away with the division would have “serious” consequences, he said.

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