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Democratic Party of Japan Secretary General Ichiro Ozawa has submitted a list of budgetary demands for fiscal 2010 to the administration. Unfortunately the process of compiling the demands lacks transparency. As Prime Minister Yukio Hatoyama moves toward a final decision about the budget, his political leadership will be tested because he has to prioritize projects amid a severe shortage of funds.

If he tries to keep all the main promises contained in the DPJ’s election manifesto, it will lead to a bloated national debt. Given the harsh financial conditions, he will need courage to drop, revise or postpone some election promises.

Representing the DPJ, Mr. Ozawa proposed retaining surcharges on road-related taxes, which bring in some ¥2.5 trillion annually in tax revenues to the central and local governments. The DPJ’s election manifesto had called for abolition of the surcharge to reduce the burden on drivers.

Although Mr. Ozawa’s proposal reverses a major DPJ promise, it extends a helping hand to an administration facing a large decline in tax revenue. In view of the nation’s financial straits, people will likely accept the proposal. Mr. Hatoyama should know that if he rejects the proposal, it will mean the loss of a precious source of tax revenue.

Mr. Ozawa called for leaving intact the promises to make high schools tuition-free and to introduce income compensation for farmers, viewing them as key planks of the DPJ manifesto.

As for the child allowance of ¥13,000 monthly per child, another main promise, Mr. Ozawa has proposed imposing an income cap on households eligible to receive it. The DPJ had proposed introducing a universal child allowance without any income cap as a way of enunciating the idea that society as a whole is responsible for bringing up children. Imposition of an income cap will change the basic idea behind the allowance in addition to making its administration by local governments more difficult.

Mr. Ozawa has also called for construction of new expressways and super-express train lines and ¥1.1 trillion in new grants-in-aid to local governments. Whatever the final outcome, Mr. Hatoyama should explain in detail how and why budget decisions have been made.

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