Prime Minister Junichiro Koizumi told his ministers Friday to ensure that the controversial issue of reforming the flow of money between the national and local governments is included in a key economic report scheduled to be finalized this month.

Koizumi issued the order during an informal Cabinet meeting, a day after the Council on Economic and Fiscal Policy unveiled a draft of the 2003 economic blueprint, according to Chief Cabinet Secretary Yasuo Fukuda.

These funding reform details were omitted from the draft.

Koizumi also told his ministers to make sure that ways of promoting decentralization and deregulation are spelled out in the report, Fukuda said.

The blueprint on economic policy and structural reforms will be the third of its kind since Koizumi took office in April 2001.

It will serve as an economic policy guideline for the year ahead.

Reforming the flow of funds between the national government and local authorities is by far the most contentious issue in the larger decentralization debate.

Finance Minister Masajuro Shiokawa told a news conference that the decision is now the prime minister’s, as ministerial debate is deadlocked.

“Although ministerial-level talks were held, some ministers only said what the bureaucrats in their ministries wanted them to say,” Shiokawa said. “I think the prime minister will have to make a decision.”

The reforms involve cuts in national subsidies, a review of tax grant allocations to local governments, and the transfer of tax collection powers to local governments.

The three-part package is one of the pillars of Koizumi’s reform drive and is expected to form the core of the economic blueprint.

Although it has been agreed that the three elements should be promoted as a single package, government ministries are at odds over where the changes should begin and which subsidies should be cut.

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