In June, the Cabinet Office's Council on Economic and Fiscal Policy stressed the need for smaller and more efficient government in its 2005 basic guideline for economic and fiscal reform. Earlier this month the fiscal 2005 Annual Report on the Japanese Economy and Public Finances also called for smaller government and the transfer of more activities from the public to the private sector.
In view of the nation's huge debts and the financial pressure anticipated as medical, pension and other social security costs increase with the rapidly advancing age of the population, it is indispensable to reduce or get rid of waste and inefficiency in the operations of the central and local governments. Now may be just the time to adopt a bold way of thinking that will be useful in carrying out drastic cuts in spending -- to the tune of, say, 10 trillion yen or 20 trillion yen annually.
Debts owed by the central and local governments have reached 700 trillion, yen or 1.6 times the nation's gross domestic product. If debts owed by corporations with a special semigovernmental status are taken into account, the amount is believed to be as high as 1,000 trillion yen. The government appears inclined to rely on large tax increases to make up for government revenue shortfalls. But this will certainly sap vitality from the Japanese economy.