Earlier in his administration, Prime Minister Junichiro Koizumi projected an image of aggressive leadership as he called for "no pain, no gain" structural reform. His bold plans included streamlining the bloated government budget. With the economy still struggling to recover, however, he seems to have lost much of his enthusiasm for fiscal reform.
The fiscal 2003 budget guidelines approved by the Cabinet on Wednesday reflect the "recovery-first" position of the ruling Liberal Democratic Party. Although the budget's final shape is subject to negotiation, it is unlikely that the 2003 budget will give a big push to structural reform and fiscal consolidation.
First of all, the prime minister has made a symbolic retreat by effectively lifting the 30-trillion yen cap on annual bond issuance. This debt limit, designed to stop runaway budget growth, now exists only in name because the proposed tax cut of 1 trillion yen or more -- designed chiefly to boost business activity -- is to be financed through bond sales.