*http://www.yomiuri.co.jp/dy/editorial/20070605TDY04005.htm*<http://www.yomiuri.co.jp/dy/editorial/20070605TDY04005.htm> ** ** *Draft economic policy leaves too much unclear*
*The Yomiuri Shimbun* A draft of the Basic Policies for Economic and Fiscal Management and Structural Reform for 2007 was unveiled Monday by the Cabinet Office--the first such basic guideline on economic and fiscal management under Prime Minister Shinzo Abe. The guideline also is regarded, in effect, as a manifesto for the government and ruling parties on their economic policies heading into the upcoming House of Councillors election in July. The draft covers a wide range of items--strategies for economic growth, administrative and fiscal reform, the environment, education, security and disaster prevention, among others. But as the contents are too broad, the main thrust of the guideline is unclear. On the issue of the economy, the draft placed top priority on economic growth and enhancing quality of life against the backdrop of a declining population. It stressed that various systems established on the premise that the population would continue to grow now require fundamental review. This is correct. The problem will be taking effective, concrete measures. === Dodging painful reforms We cannot escape the feeling that the policies in the draft have avoided reforms that could be painful for voters, such as whether to raise the consumption tax, while paying extra attention to widening income inequality and regional issues, most likely with an eye on the upper house election. The strategies for strengthening economic growth focus on policies that avoid compounding the widening economic gap, including assisting job-seekers and raising wages for workers at small and medium-sized companies. In an effort to revitalize regional economies, the government will study the possibility of establishing a state-backed bailout body for midsize firms facing difficult business conditions, modeled on the Industrial Revitalization Corporation of Japan, which dealt with corporate reconstruction for Daiei Inc. and Kanebo Ltd. But it is unclear whether the functions of a regional version of the IRCJ would duplicate policies on revitalizing regional small and medium-sized companies that the Economy, Trade and Industry Ministry already has started, as well as industrial revitalization funds from the private sector. Despite the lack of adequate discussion on the issue, the possibility of creating a regional version of the IRCJ was still included in the draft. The government may be hoping to appeal to the regions by showing it is paying careful attention to areas that fall behind in economic recovery. On the other hand, the draft does not include policies on the promotion of economic partnership agreements that would lead to greater market liberalization of farm products because of difficulty coordinating the wording of such policies at the draft stage. === Greater detail necessary On the pressing issue of placing the nation's finances on a sound footing, the draft says the government will realize the expenditure reform announced in the 2006 guideline on economic and fiscal management. But such fiscal rehabilitation cannot be realized by simply cutting expenditure. The draft indicates the government will begin a full-scale discussion about reforming the country's tax system, including a consumption tax rate hike, in the autumn or later. But it has only demonstrated an abstract basic philosophy, talking of securing equality between and within the generations. What the public wants to know is the direction more concrete reforms will take. This year marked the seventh since the government began to compile annual guidelines on economic and fiscal management. It is now established as a basic guideline for policy management. Recently, aiming for increased budget allocations, each ministry and agency has been vigorously pressing to have its policies included in the guideline. As a result, there are signs the contents of the guideline are already being diluted. When the guideline is officially compiled, the Abe Cabinet should make clear what its priorities are and what the Cabinet considers its most pressing issue. (From The Yomiuri Shimbun, June 5, 2007) (Jun. 5, 2007) [Non-text portions of this message have been removed]
