The government must restructure its deficit-ridden fiscal condition within the next 10 years, hopefully by the end of fiscal 2008, the Economic Strategy Council recommended in its final report submitted Friday to Prime Minister Keizo Obuchi.
The ESC, a panel of business leaders and scholars established in August, also said Japan still has the potential to attain 2 percent growth, noting the nation can achieve that goal by fiscal 2001 by taking sufficient structural reforms.
After six months of discussion and surveying economists and business leaders in Japan, the 10-member panel, headed by Hirotaro Higuchi, chairman of Asahi Breweries Ltd., drew up a scenario for economic recovery using a three-step approach in its nearly 90-page report.
The council terms fiscal 1999-2000 the rehabilitation period from the burst of the bubble economy, fiscal 2001-2002 the time for Japan to return to a healthy path of economic growth and 2003 onward as the full-scale recovery phase with the regaining of the nation’s fiscal health and the execution of various structural reforms. “I’d like to direct and urge each Cabinet minister to start implementation of such proposals, beginning with the ones that can be realized,” Obuchi said after receiving the proposals from Higuchi.
The panel’s duty will end with the final report, but Obuchi disclosed an intension to take on panel members as economic advisers.
The panel had initially sought to include specific target figures and concrete steps for key reforms in its final report, including those dealing with taxes, social welfare programs and the fiscal investment and loan program, funded by nontax revenues such as postal savings.
However, because the panelists failed to reach a consensus and due to pressure from government ministries, the final report did not specify figures for those reforms, including the timing of a consumption tax increase and its desired rate, and reform steps for the fiscal investment and loan program.
Panel sources said there were various opinions among the members, and they agreed it would be difficult to urge the state to make any commitment on a tax increase to cover the fiscal deficit because the extent of the deficit in the future is still uncertain.
The final report boasts 234 proposals, up from the 164 in the interim report, and includes a list of laws that need to be revised to carry out the proposals.