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2008年12月 5日 (金)


2008/12/5 --The Asahi Shimbun, Dec. 4(IHT/Asahi: December 5,2008)

EDITORIAL: Opening the fiscal spigot


The era of budget austerity is over. The government is abandoning its tight fiscal policy aimed at restoring health in public finances, freeing itself from the strong pressure to cut spending that was felt in the past several years.


The move was made very clear in the basic principles approved by the Cabinet of Prime Minister Taro Aso on Wednesday to be used in compiling the fiscal 2009 budget.


One passage from the document in effect declares an end to budget austerity, stating that amid the dramatic changes in the world's economic and financial conditions, the government must take swift, bold and flexible actions to protect the people's standard of living and the nation's economy.


A return to freewheeling spending


In plain words, this means the government will forget about belt-tightening and start to increase spending using cash raised by issuing new government bonds. The aim is to lift the sagging economy and create new jobs.


This also means that the strict fiscal reform agenda adopted by former Prime Minister Junichiro Koizumi that aimed to chip away at the government's towering debt will be put on hold.


The government and ruling camp are already considering 10 trillion yen in additional public spending over the next three years, a move that is separate from the framework of budget ceilings.


Some ruling party lawmakers are even suggesting spending an extra 10 trillion yen annually.


Economists predict the Japanese economy will sink deeper into recession next year, and public anxiety about the future is growing. This dire situation demands serious policy responses.


But the government's way of dealing with the economic challenge raises concerns that the policy change will lead to another big splurge in public works spending and merely end up ballooning the government's already massive debt--without doing much to shore up the floundering economy.


This nation is still haunted by the bitter policy failures that resulted from this very approach about 10 years ago.


And the view that the Aso administration has jumped haphazardly into this important change in government fiscal policy is also raising concerns.


Takashi Sasagawa, the chairman of the Liberal Democratic Party's General Council, called for large-scale fiscal expansion even before the government's decision on the policy shift. Aso "should change his stance and develop a spending plan that reflects his own policy ideas more clearly in return for our wholehearted support for his Cabinet," he said.


Sasagawa's words were in effect a declaration that the ruling party wouldn't help Aso remain in power unless he agreed to switch to a free-spending fiscal expansion policy.


This is not the only sign indicating that some within the ruling party are trying to take advantage of Aso's weakening political standing, which is growing from his delay in dissolving the Lower House for a snap election.


Aso went along with the fiscal stimulus proposal to hand out 2 trillion yen in cash to households, a move that met with a lot of skepticism about its effectiveness even within the LDP. But Aso accepted the idea because he found it hard to reject the strong demands of the New Komeito, the LDP's junior coalition partner.


The LDP has also manipulated things to its advantage in the issue of mixing tax revenues earmarked for road construction into the general account budget.

Aso previously pledged to provide 1 trillion yen of the earmarked tax receipts to local governments as tax allocation grants to use freely. But his proposal was torpedoed by LDP politicians serving the road construction lobby interests. Now it seems that money will be given away only for public works projects.


The Aso administration has been forced to take policy decisions that do not reflect its own clear will. It has made concessions under strong pressure from the ruling camp and even allowed the ruling coalition to control policymaking.


The fiscal policy change occurred just as Aso's political leadership weakened. It is hard not to be cynical about lofty government promises to avoid passing on the burden to future generations and to maintain fiscal discipline.



Faced with a global recession, clear and careful thinking is in order. Undoubtedly, the recession will strike a heavy blow to the nation's employment situation and to its local economies. The effects will be felt for years to come. It is the government's responsibility to use its power to expand the social safety net and protect the quality of people's lives.


On the other hand, the nation's public finances are in a shambles.

The combined long-term debts of the central and local governments are equal to 150 percent of the nation's annual gross domestic product. We're on a treadmill of debt.


The government must not relax its fiscal discipline without first devising effective strategies to prevent a further deterioration of the nation's fiscal health.


Prudence is of utmost importance. That means singling out the policy areas that are sure to produce payoffs in future and placing a high priority on concentrating fiscal resources in these areas.


Potential candidates for government policy support include, for example, environmental and energy technologies that will become indispensable 10 years or 20 years down the road. The government should also support efforts to develop infrastructures that can meet the needs of the nation's rapidly aging population, and it should ensure that the Tokyo metropolitan area is less vulnerable to strong earthquakes.


The sad truth about past fiscal stimulus packages is that when the fiscal spigot was opened, it created a flood of pork-barrel spending initiated by vote-seeking politicians.


If the new spending drive includes proposals to give away cash or for dubious road and dam projects, Aso's government will find it hard to answer criticism from future generations forced to foot the bill.


Discerning necessary policy measures from frivolous boondoggles requires excellent judgment. To make the right decisions, our political leaders must have a clear and viable vision for the future of Japan's society and economy.


We cannot help but wonder if Aso and his administration are politically strong enough to tackle this tough challenge and lay a solid foundation for building a brighter future for the nation.


Only through an election can Aso's administration gain the clear public mandate it needs to pursue its policy agenda with vigor.


Aso has his back to the wall


If the entire fiscal rehabilitation agenda must be shelved temporarily in order to put the economy back on a growth track, then the government must also set up effective measures to prevent profligate spending.


One possible step would be passing a Cabinet resolution that would reinstate the budget austerity regimen as soon as the economy resumes growth. It would in effect place a time limit on the fiscal free-spending policy.


As the nation's history shows, Japan's governments have tended to become addicted to the idea of nonstop spending to achieve economic growth, piling on debt to finance a "stimulant" habit. To ensure that Aso's envisioned fiscal expansion will remain in line with the aim of cleaning up public finances, the government needs to create a strict framework for maintaining discipline in spending.


But taking such measures requires powerful political muscle. Aso must exert solid control over the ruling camp. To ensure the budget and other spending plans are enacted as envisioned, the government also needs to figure out ways to win the support of the opposition camp, which controls the Upper House. The Aso administration now has its back to the wall.



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