« 迂回献金:先物会社が与謝野氏、渡辺喜氏に ダミー通じ | トップページ | 官製談合 あきれ果てた国交省の体質 »

2009年6月25日 (木)


--The Asahi Shimbun, June 24(IHT/Asahi: June 25,2009)
EDITORIAL: End of era in fiscal policy

Fiscal policy has apparently reached the end of an era, one that was marked by renewed efforts to restore health in the nation's public finances based on annual guidelines known as Honebuto no Hoshin.

The government on Tuesday decided on its latest Honebuto policy guidelines. They confirm that the principle of curbing growth in social security costs, a symbol of the spending reform initiative started by former Prime Minister Junichiro Koizumi and inherited by his successors, has become a dead letter.

The move reflects concerns within the ruling Liberal Democratic Party that it will take a drubbing in the next Lower House election unless it promises to fix health and nursing care problems and other troubled welfare programs.

The era of new fiscal responsibility symbolized by the annual policy guidelines began in 2001, the year the Cabinet led by Koizumi was sworn in. Until then, fiscal discipline was maintained by the Finance Ministry as it battled calls for more spending from the iron triangle of politicians, bureaucrats and businesses.

But the budget deficit swelled in the late 1990s because of a series of fiscal stimulus packages to revitalize the flagging economy. The annual policy guidelines by the Council on Economic and Fiscal Policy were designed to slam on the fiscal brakes.

The Honebuto system allowed the prime minister's office to exert leadership in the development of budgets and to clean up state finances, primarily through spending cuts.

In addition, the Koizumi government took steps to reform the spending structure, for example, by cutting public works expenditures, in response to criticism by taxpayers about wasteful public spending. The Koizumi administration also went ahead with the privatization of public corporations operating toll roads and state-run postal services, espousing the importance of market principles and small government.

But the government's fiscal policy ran into a brick wall. In its Honebuto blueprints for fiscal 2006, the Koizumi administration set five-year targets for spending cuts to impose fiscal discipline on successive governments.

While these fiscal targets led to budget savings, it meant the public was continually asked to endure the pain of decreasing welfare benefits. It became clear that there was a limit to Koizumi's approach to fiscal rehabilitation, which depended on spending cuts without a strategic focus and simply postponed any step to increase the tax burden on people.

The current administration of Prime Minister Taro Aso has acknowledged that the nation's welfare system is in dire straits and pledged to raise the consumption tax rate after economic recovery to enhance social security programs. But Aso's first policy guidelines, announced in the run-up to the Lower House election, make no reference to the consumption tax issue.

If main opposition Minshuto (Democratic Party of Japan) defeats the LDP in the election and wins a public mandate to govern, the Honebuto framework will be discarded. But Minshuto's vow to keep the consumption tax rate unchanged for four years and find 20 trillion yen in new money to finance its proposals mainly by eliminating administrative waste is reminiscent of Koizumi's pledge to avoid a hike in the consumption tax rate while he was in office. And Minshuto's policy vision is by no means clear.

With the era of Koizumi's reforms now over, a major challenge confronting Japanese politics is to chart a new course for the nation.

A prolonged period of political confusion and a leadership vacuum would trigger sell-offs of Japanese government bonds by investors worried about the nation's fiscal future.

That could usher in an era when rising long-term interest rates impose "market discipline" on politics.


« 迂回献金:先物会社が与謝野氏、渡辺喜氏に ダミー通じ | トップページ | 官製談合 あきれ果てた国交省の体質 »





« 迂回献金:先物会社が与謝野氏、渡辺喜氏に ダミー通じ | トップページ | 官製談合 あきれ果てた国交省の体質 »