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A plan to streamline the bureaucracy by cutting 5.7 percent of the central government workforce and a plan to create a new financial institution in October 2008 under an overhaul of public financial institutions were approved Tuesday by two separate government panels.

The personnel cuts are expected to be endorsed Friday by the Cabinet, while bills on the financial institutions are being drafted for submission to the Diet this fall, government officials said.

The headquarters for administrative reform and the headquarters for official financial institutions reform, both headed by Prime Minister Junichiro Koizumi, adopted an outline for the personnel cuts and a “road map” for government-run financial institution reform at a joint meeting Tuesday morning.

The outline, drawn up under the administrative reform promotion law enacted in May, calls for a reduction of more than 5 percent in the 332,000-strong bureaucracy. The change adopted Tuesday will cut government payrolls by 18,936, or 5.7 percent.

The personnel cutbacks will apply to five ministries, including the agriculture, land, and health ministries.

There is less, however, to the cuts than meets the eye. Of the 18,936 employees who are to be let go, 13,944 will be transferred to other institutions, including semigovernmental independent administrative corporations. The remaining 4,980 job cuts are to come through attrition.

The financial institution reform plan meanwhile calls for setting up a new financial institution to meet the needs of small businesses, farmers and fishermen, and to promote economic development in Okinawa.

The new financial body will be a government-financed corporation that merges the operations of five of the eight existing government-run financial institutions.

The five institutions — National Life Finance Corp., Japan Finance Corp. for Small Business, Agriculture, Forestry and Fisheries Finance Corp., and part of the Japan Bank for International Cooperation — will be merged into the new body in October 2008. Okinawa Development Finance Corp. will join later.

Of the three other financial institutions, Shoko Chukin Bank and Development Bank of Japan will be turned into holding companies in October 2008 and privatized in five to seven years. Japan Finance Corp. for Municipal Enterprises will be abolished in fiscal 2008.

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