Aso to break with Koizumi reforms

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With the economy in recession and public approval ratings low, Prime Minister Taro Aso signaled Wednesday that Japan must depart from the reformist fiscal policies pursued by former Prime Minister Junichiro Koizumi and his successors.

On Wednesday, Aso’s Cabinet adopted a basic policy for forming the fiscal 2009 budget and stressed it is ready to draft more stimulus packages.

“The situation is different from (the 2001-06 Koizumi era),” Aso told reporters Wednesday.

Some politicians in the ruling coalition have floated the idea of creating extra budgetary allocations separate from Koizumi’s long-standing budget caps, which have been automatically reducing the public works and social welfare budgets.

Aso did not rule out that option.

“Various ways are conceivable with the emerging situation. In that sense, I’d like to discuss it with the ruling parties and decide,” Aso said.

Earlier in the day, the government adopted its basic fiscal policy for 2009 and said it would put priority on protecting the economy and livelihoods from the global financial crisis.

“We will take courageous actions flexibly and resiliently in accordance with (unfolding) situations,” the government said in the policy paper, signaling its readiness to use more pump-priming measures to stimulate the faltering economy.

A senior member of the Liberal Democratic Party meanwhile argued that the economy will need ¥30 trillion in extra stimulus packages over the next three years.

And the budget cap that was advocated by Koizumi and his successors Shinzo Abe and Yasuo Fukuda should not apply to these packages, the unnamed executive said.

The government decided in 2006 to adopt a guideline pledging to achieve a primary budget surplus in fiscal 2011.

The reduction policy includes a 3 percent annual cut in public works expenditures and a ¥220 billion annual cut in the automatic boost to social security spending.

Economic and fiscal policy minister Kaoru Yosano meanwhile stressed that the government has not abandoned the reform plans initiated by Koizumi.

(policy) lines taken since the Koizumi Cabinet were not altered,” Yosano told reporters Wednesday, noting they will be “maintained,” but not “firmly adhered to.”

Aso also claimed it is not impossible for economic reform and financial restoration to coexist and progress at the same time.

“I’ve said it many times that the three years (needed to mend the economy) are for measuring the economy. I am thinking of financial restoration or reform in the medium term,” Aso told reporters.

He also highlighted the importance of retaining the government’s goal of achieving a primary budget surplus.

“Although the flag slightly tends to be broken and tarnished, I think we need to hold up this flag,” Yosano said. He also acknowledged that the economy is indeed in difficulty.

“Japan is also in the very turbulence that was hard to forecast,” Yosano said.

Information from Kyodo added.