Koizumi trimming Japan's public works


Koizumi, pictured last year, has seen his reforms stall and popularity fall as Japan's economy slumped

By Alex Frew McMillan
CNN Hong Kong

TOKYO, Japan -- Japan plans to scale back its spending on public works projects, a push launched by Prime Minister Junichiro Koizumi.

Critics of Japan's public projects contend they eat up too much of the national budget.

The agencies that oversee the projects and the politicians who have won them for their constituencies defend their budgets each year based on those long-term plans.

But Finance Minister Masajuro Shiokawa has argued that leads to a rigid budget-allocation system each year. It ties the government's hands in reacting to the global economic downturn, for instance.

Shiokawa on Friday said the government will cut the amount of money spent on public works. But the government does not plan to trim the number of projects it funds, he said.

Seven ministries face the scalpel

According to a report in the Nihon Keizai Shimbun on Friday, Koizumi plans to order cabinet ministers to scrap or reduce nine long-term projects that are slated to finish this fiscal year, by March 2003.


The Bank of Japan, headed by Masaru Hayami, this week upgraded its outlook on the economy for the fifth straight month

The cabinet meets on Friday. Koizumi was expected to tell seven ministers to review 30 reform steps, including scaling down public works, the Nikkei states.

The affected ministers are from the agriculture, education, home affairs, land, science & technology, trade and welfare ministries.

The prime minister will direct the ministries to finalize and present their plans to the Council on Economic and Fiscal Policy, the group overseeing Japan's reforms, by August.

Koizumi will direct the affected ministries to build their scaled-down plans into their budgets for the 2003 business year. These plans are due by the end of August.

At the same time Koizumi is attempting to scale ministry budgets, the health ministry is pushing for increased funds to fund fertility treatment(Full Report)

Criticism of Koizumi stagnation

Reform-minded Koizumi has frequently criticized the size and scope of Japan's government agencies. He has also directed ministers to establish plans to privatize chunks of the entities under their control.


Critics suggest that Koizumi has talked plenty about reform since his election in April 2001 but has achieved little

Critics such as ING economist Richard Jerram fault the leader for failing to deliver on his much-touted reform platform since Koizumi stormed to power in April 2001.

Jerram has stated that Koizumi continues to talk fervently about reform but has achieved little.

The leader's popularity has taken a battering, as Japan suffers through one of its biggest recessions since World War II. Political analysts suggested when Koizumi was elected that the leader would rely on his once-record public support to survive.

Tension easing slightly

Still, an export-driven recovery and other rosier economic factors have eased some of the tension in Japan. That has not yet factored heavily into Koizumi's approval ratings.

Corporate confidence has improved. A strong tankan report has also eased pressure on the government to push extra spending or cut taxes, Jerram wrote in a July 1 report.

Koizumi intends to slash the total value of public-works projects to 4.8 percent of Japan's gross domestic product, from 5.1 percent in the 2000 business year. That would set the public works clock back to the early 1990s.

Koizumi is also set to confront one of Japan's most-entrenched lobbies, its farmers. He intends to trim subsidies for rice farming intended to prop up rice prices in Japan.