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2013年6月16日 (日)

骨太方針 「再生の10年」への険しい道

The Yomiuri Shimbun June 16, 2013
Nation faces rough road ahead to achieve 'decade of revival'
骨太方針 「再生の10年」への険しい道(6月15日付・読売社説)


To realize a “strong Japan,” it is indispensable to revive the economy with a growth strategy and fiscal rehabilitation as the driving forces.

This is a steep path for Japan, which has the worst fiscal deficit of any industrialized nation, but the most important thing for the nation is to exercise its ability to get things done. In that sense, Abenomics--a set of economic policies of the administration of Prime Minister Shinzo Abe--will be put to the test.

The government on Friday approved the basic policies for economic and fiscal management and reform at a Cabinet meeting. The policies were compiled by the Council on Economic and Fiscal Policy, which was revived by Abe in January. It is the first time since the cabinet of Taro Aso four years ago that such basic policies have been compiled.

Abe emphasized his administration would “reverse two decades of stagnation for the Japanese economy to a new decade of revival.”

Surplus target to stay

The most important point of the basic policies is that they clearly state the government will maintain its fiscal rehabilitation target of “turning the primary fiscal balance of national and local governments into a surplus by fiscal 2020.”

Currently, the fiscal deficit amounts to about 34 trillion yen. This is quite a high hurdle as this red ink must be eliminated in seven years.

Furthermore, the basic policies set a new target of realizing “a steady decline in outstanding long-term debts” even after fiscal 2020.

The Bank of Japan has been purchasing a huge amount of government bonds under its aggressive monetary-easing policy. If this action is taken by markets as merely a way to finance the fiscal deficit and confidence toward the government fiscal policy is shaken, prices of the government bonds may sharply decline, causing long-term interest rates to further rise.

It is quite appropriate that the basic policies emphasize the government’s determination to realize “both sustainable economic growth and fiscal consolidation,” clarifying its stance of emphasizing fiscal discipline.

Lacking concrete content

However, the policies show no concrete path for fiscal consolidation. In that sense, the policies lack depth. This is probably because the administration puts a higher priority on consideration for local governments and industry organizations, with the July House of Councillors election approaching.

The basic policies are especially unclear about cuts in government expenditures, although they do say the government will aim to review all spending for social security--the government’s biggest item of spending--without exception to promote efficiency. However, the policies only list subjects for review such as expenses for medical costs for the elderly not covered by health-care insurance and promotion of the use of generic drugs.

It is rather problematic that the policies do not refer to how much the spending should be cut.

On the other hand, the policies say the government will proactively handle so-called national land strengthening measures such as improvement of aging infrastructure, including roads and bridges, as well as disaster management efforts.

We understand the importance of these measures, but public works projects involve a huge amount of expense. It remains ambiguous in the basic policies how fiscal discipline will be maintained in this connection.

Concerning the planned increase in the consumption tax rate, the policies only say judgment on the raise will be made by comprehensively considering the economic situation.

Sort out policy priorities

The focal point for the moment is whether the government will be able to articulate a clear plan for putting state finances on a sound footing when it compiles a midterm fiscal program this summer.

For fiscal rehabilitation to be successful, it is unavoidable to curb spending and promote regulatory reform although these will impose pain on the people.

Numerical targets for spending cuts and other factors that can be appreciated by the market will have to be incorporated in the fiscal program.

In summer, the government will decide the ceiling on budgetary requests by ministries and agencies for the fiscal 2014 budget. Efforts must be made to devise ways of allocating limited budgets in order of priority to implement policies effectively.

For fiscal reconstruction to succeed, it is also necessary for business to recover steadily.

The gross domestic product for the January-March quarter grew at a high 4.1 percent annual rate in real terms. In its monthly economic report released this month, the government revised upward its business assessment, saying, the economy “is picking up steadily.”

The current economic climate has been brightening, but optimism is not warranted.

At the behest of Prime Minister Abe, it was decided to start annual discussions about tax system reforms, such as tax breaks for plant and equipment investment, earlier than in usual years. This is an appropriate judgment.

Abe expressed his willingness to carry out the government’s growth strategy, saying it “will submit necessary bills in an extraordinary Diet session in autumn, which will be a ‘growth strategy parliament.’”

The growth strategy is designed to realize economic recovery with the initiative of the private sector and to expand business further. An increased growth rate would bring about a rise in tax revenue, thereby putting fiscal management on a sound footing. This would alleviate anxiety about the future, and personal consumption and corporate capital investment would soar. Realizing such a virtuous circle is very desirable.

Restart N-reactors

Realization of stable growth is premised on a stable supply of cheap electricity.

Operation has been suspended in almost all of the nation’s nuclear power stations. This has led to increased fuel costs at thermal power plants and a series of hikes in utility bills.

It is natural that the basic policies clearly state, “The restarting of nuclear reactors will be promoted by respecting the judgment of the Nuclear Regulation Authority.”

The nuclear watchdog’s new regulation standards will be in place in July. We urge the authority to screen utilities’ applications to restart their reactors without delay.

The government must exercise leadership in winning over local governments, which have administrative authority over sites where nuclear power plants are located, so reactors can be restarted smoothly after their safety is confirmed by the authority.

(From The Yomiuri Shimbun, June 15, 2013)
(2013年6月15日01時20分  読売新聞)


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