Since Prime Minister Shinzo Abe's Liberal Democratic Party suffered a crushing defeat in the Upper House election, it is all the more important for the government to work out a credible economic policy. As Japan's population grays and decreases at the same time, it will be essential to enhance efficiency in administration and finance and to set policy priorities.

Mr. Abe has made clear that his basic approach in compiling the fiscal 2008 budget is to pursue sustained economic growth and spending cuts. Yet the 2007 basic policy for economic and financial reform, adopted in June, includes one measure after another that would increase spending, including those to accelerate economic growth, aid local economies and small- to medium-size enterprises, and improve the environment.

Implementation of these measures will lead to further deterioration of the nation's financial situation and make it difficult to achieve the 2006 basic policy goal for economic and financial reform adopted last year, which calls for putting the primary balance of the national budget in the black in fiscal 2011.