The Finance Ministry on Wednesday proposed a slimmed down draft budget of 32.54 trillion yen for the fiscal 2001 investment and loan program, down 15 percent from the current year and its second straight year-on-year fall.
The decline is the largest since the creation of the program more than a century ago and reflects the introduction of a market-mechanism that will reform the investment and loan program in April by cutting loans to almost all public entities.
The program, known as "zaito," is often dubbed the nation's second budget because of its size. It channels funds through the Finance Ministry's Trust Fund Bureau to government-affiliated firms and local governments for loans, investment projects and aid.
Zaito, which has mainly been financed by postal savings and public pension insurance funds, has long been criticized as inefficient and inflexible, and ministry officials have begun to slash some of the most inefficient programs.
The April reform will scrap mandatory entrustment of those funds to the ministry's Trust Fund Bureau. Instead, 33 quasigovernmental institutions will in principle be required to raise funds directly from financial markets without government guarantees.
But only 20 institutions in the program will issue their own bonds, totaling 1.1 trillion yen, or only 3.4 percent of the total program. The institutions include the Central Cooperative Bank for Commerce and Industry, which will issue 224.9 billion yen in bonds, and the Housing Loan Corp., which will issue 200 billion yen.
Despite the reduced budget, zaito institutions remain committed to projects deemed essential to the nation's social infrastructure, such as airports and railways, the officials said.