Prime Minister Ryutaro Hashimoto’s Conference on Fiscal Structural Reform gave the go-ahead April 24 for revisions to three points of the fiscal austerity law as part of “emergency measures” to accommodate the government’s economic stimulus package.
Some fundamental points of the Fiscal Structural Reform Law, which was enacted last November to provide numerical targets aimed at reducing the nation’s huge fiscal deficit, will now be changed.
The most controversial point of the planned revisions is suspending in fiscal 1999 the implementation of a cap on social welfare spending that limits annual budget growth in that area to no more than 2 percent for fiscal 1999 and 2000.
This was the result of a compromise struck late Thursday with Health and Welfare Minister Junichiro Koizumi, who had been against any revision of the law, but runs counter to Hashimoto’s earlier vows to keep the legal caps untouched.
“The item on which I pondered the longest was the (easing of the) social welfare spending cap,” Hashimoto told reporters after the meeting, adding that he agreed to the exception because these outlays greatly affect the lives of the general public.
Social security-related expenditures will rise as the population ages, he explained, and if the cap remains in place, such costs will have to be shouldered by individuals and will increase the burden on households despite the tax cuts included in the stimulus package.
Social welfare outlays are expected to be steepest in fiscal 1999, because the government’s insurance system to provide nursing care for the elderly will not take effect until April 2000, he added.
In addition to the welfare outlay exception, the meeting approved Hashimoto’s decision to revise the law so the government will not have to continue reducing the issuance of deficit-covering bonds each year.
Once the law is revised, the government will have freedom in issuing bonds in the event of a serious disaster, such as the Great Hanshin Earthquake, or severe economic conditions brought on, for example, by a prolonged slump or an unforeseen event at home or abroad.
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