The government is now working on measures to bolster the nation's slowing economy. Japan's gross domestic product in the March-June quarter shrank by an annualized 2.4 percent from the previous quarter.
Government leaders should be keenly aware that the Japanese economy faces the double danger of a recession and inflation, and pay due attention to the fact that consumer spending, exports and corporate capital investment all fell in the March-June quarter.
The government is considering drawing up a supplementary budget. It will include support for agriculture, fisheries and transportation and construction industries suffering from rising fuel prices, financial support to small and medium-size enterprises, development of energy-saving technologies and new energy sources, improvement of medical services and a reduction of expressway fares.
The government is also considering streamlining distribution routes for agricultural and fishery products, improving conditions for irregularly employed workers, enhancing food safety and strengthening the quake-resistance of school buildings. Some of the measures are important from a long-range point of view, but they may not boost the economy.
Securing revenue sources for the planned supplementary budget will be a problem. A surplus fund from the fiscal 2007 budget and an emergency fund of the fiscal 2008 budget may make about ¥600 billion available. To secure additional funds, the government should refrain from large-scale bond issuance and instead make strenuous efforts to divert money from special account budgets set aside for nonessential projects. To avoid a situation in which the supplementary budget is large in size but has too little effect, the government must strictly prioritize its budgetary measures.