In line with Prime Minister Junichiro Koizumi’s fiscal reform policies, Finance Minister Masajuro Shiokawa has acknowledged the need to make substantial cuts to general expenditures for fiscal 2002.
The reductions are necessary if the government is to meet Koizumi’s pledge to restrict new issuance of government bonds to no more than 30 trillion yen, the new finance chief said in an interview.
“Although this idea is not concrete yet, we can tighten general expenditures by 2 trillion yen and local tax grants by 1 trillion yen (for fiscal 2002),” Shiokawa said. “This might cause pain, but it’s time to distance ourselves from depending on government bonds as a convenient source of funds.”
According to Finance Ministry projections of the nation’s medium-term fiscal conditions, the government would have to issue around 33 trillion yen in government bonds in fiscal 2002 to augment a revenue shortage.
A 79-year-old veteran politician of the Liberal Democratic Party, Shiokawa calls himself a novice in fiscal policy but appears ready to effect fiscal change.
He said that along with efforts to reduce new bond issuance, he will start “reviewing the balance among various budget outlays.”
“Reviews would include cutting off dormant public works projects and shifting more resources to new areas,” he said. “Meanwhile, more private-sector initiatives should be introduced for projects that are considered feasible in terms of business.”
But cutting public works spending, which has maintained a budgetary share of over 9 trillion yen in recent budgets, may be difficult in light of the stubborn triangle of vested interests among the construction industry, bureaucrats and lawmakers tied to such projects.
“I will play a role as mediator between the Cabinet and ruling parties and strive to explain Prime Minister Koizumi’s budgetary reforms and seek understanding for them,” Shiokawa said. “I believe he has chosen me as the finance minister exactly for that purpose.”
Shiokawa said he wants his budgetary reform ideas reflected in the fiscal 2002 budget. He said he is concentrating on the government’s Council on Economic and Fiscal Policy, which in June will draw up guidelines for ministries and agencies to draft their budget requests for the next fiscal year.
As to keeping the balance between structural reforms and economic growth, Shiokawa repeated that Koizumi’s reform steps will not drive the economy into a contraction or further deflation.
“Under Prime Minister Koizumi’s economic policies, structural reform would never run counter to economic growth,” Shiokawa said.
“We have fully explained this point both at home and abroad.” At a meeting of Group of Seven finance ministers and central bank governors held Saturday in Washington, Shiokawa conveyed to his counterparts Japan’s resolve to carry out structural reforms to achieve an economic recovery.
Shiokawa said he also underlined Tokyo’s intention to carry out measures outlined in an emergency economic package compiled April 6 that calls for speeding up banks’ final disposal of bad loans and revitalizing stock and land transactions.
Showing readiness to help revamp banks’ capital bases, he said, “If financial institutions ask the government for public funds, we will accept their request.”
Shiokawa also downplayed the need to form a supplementary budget for the current fiscal year to cope with a possible rise in unemployment stemming from structural reforms.
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