Opposition parties grilled Prime Minister Ryutaro Hashimoto on April 13 over ambiguities concerning the extent to which he plans to revise the fiscal austerity law.
Hashimoto explained to a special session of the House of Representatives Budget Committee that he hopes to keep revisions to the Fiscal Structural Reform Law to a minimum, such as providing the government with more flexibility to issue deficit-covering bonds.
The opposition argued that a minimum change in the reform law would only make it harder for him to meet other targets set in the law. They demanded that Hashimoto step down for retracting his austerity policies.
Conference members began debating revisions to the law Friday; they are expected to reach a conclusion by early next week.
The day’s session was held in response to Hashimoto’s policy reversal from pushing fiscal austerity to economic stimulus. Last week, the prime minister announced additional income tax cuts and a pump-priming package with real spending of at least 10 trillion yen.
Hashimoto has repeatedly called his about-face an emergency response to the serious state of the economy and said the basic foundations of the fiscal reform law would not be touched. “I suggested to the conference that the law could have more flexibility in its ceiling on deficit-covering bond issues,” Hashimoto said. “And while debate has yet to culminate, I personally hope that the remainder of the law will not be changed.”
The law currently requires the government to keep reducing its deficit-bond issues until it stops issuances altogether by fiscal 2003, and if this clause is eased, it would give the current government room for temporary tax cuts.
After Hashimoto’s explanation, Naoto Kan, head of the largest opposition party, the Democratic Party of Japan, attacked the prime minister for not clarifying what part of the law would remain intact. He argued that it would become even more impossible to meet the other parts of the law, such as reducing the fiscal deficit to no more than 3 percent of gross domestic product by fiscal 2003, if the revisions only cover the provision of more flexibility in financing debts through bonds.
Still, Hashimoto stuck to his position that the revisions to the law would be minimal. He hinted, however, at the possibility of taking a hard look at the law’s tight cap on growth in social security expenditures — a ceiling put in place even though the nation’s population is aging at a rapid pace. “I know this is an area that is very closely tied in with the lives of the general public, and I acknowledge that we need to devise something for it,” he said.
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