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2010年6月 8日 (火)

菅・新首相 景気と財政再建の両立を図れ

The Yomiuri Shimbun (Jun. 8, 2010)
Fiscal fix must be part of business recovery
菅・新首相 景気と財政再建の両立を図れ(6月6日付・読売社説)

Putting the economy on a stable course and rehabilitating the state finances--Prime Minister-elect Naoto Kan will have his work cut out as he tries to steer the national economy.

Kan must make growth compatible with fiscal reconstruction by adopting a flexible approach and breaking free from the Hatoyama administration's obsession with giving top priority to delivering on campaign pledges.

At the news conference last week where Kan announced his candidacy for the presidency of the Democratic Party of Japan, he spoke of his intention to improve the nation's fiscal health. "We'll seek to stop state debt from continuing to increase indefinitely," he said. Kan needs to translate this idea into concrete shape--starting with the fiscal 2011 budget.

Kan, as deputy prime minister and finance minister in the Hatoyama Cabinet, has already made moves to fix the huge fiscal deficit. He has spoken, for example, of capping the new issuance of government bonds in the fiscal 2011 budget at less than the 44 trillion yen issued in fiscal 2010.

Unless the government puts the brakes on government bond issuance, long-term debts held by central and local governments--which are predicted to reach a staggering 862 trillion yen as of the end of fiscal 2010--are expected to further swell, thereby eroding confidence in government bonds.

Having attended several international conferences as finance minister, Kan might have recognized anew the serious fiscal conditions gripping Japan. At any rate, we welcome his statement in favor of "holding down government bond issues to below 44 trillion yen."


Cut spending first

The bond issuance worth about 44 trillion yen for the current fiscal year is the largest ever projected in an initial budget. The most pressing task for the government will be to reduce its bond issuance.

First and foremost, spending should be reined in as much as possible. The fiscal 2010 budget became bloated due to hand-out policies pledged in the DPJ's manifesto for last year's general election. Among them are child-rearing allowances, income compensation for individual farmers and making public high school tuition free.

Such pork-barrel measures cannot be allowed to continue. Kan must trim waste and not blindly adhere to policies promised in the party's manifesto.

Raising the consumption tax rate will be a surefire source of revenue. The consumption tax will be indispensable for helping to meet social security costs that have been soaring by nearly 1 trillion yen annually.


Make tax hike a poll issue

Some people suggest such a tax increase could adversely affect the economy. Kan, however, has brushed off such concerns, saying the economy will improve if additional revenue accruing from a tax increase is used to improve medical and nursing care treatment, which will create new jobs in these fields.

If Kan genuinely believes this, we suggest he seek the people's mandate on the advisability of raising the consumption tax in this summer's House of Councillors election. If voters give their consent to this policy in the election, Kan must start working out concrete measures to implement the tax increase while paying close attention to business trends and conditions.

Equally important will be compilation of guidelines on a "medium-term fiscal framework" and a "fiscal management strategy." The former will set a three-year blueprint for budgets starting with fiscal 2011, while the latter will spell out a longer-term fiscal management strategy. Both are being put together in tandem with compilation of the DPJ's campaign pledges for the forthcoming election.

The content of the two guidelines will give us a clear idea of the incoming prime minister's resolve on fiscal reconstruction.

(From The Yomiuri Shimbun, June 6, 2010)
(2010年6月6日01時43分  読売新聞)


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