Fiscal System Council calls for ‘big-boned’ policy line that will further deepen economic crisis

Japan Press Weekly

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Fiscal System Council calls for ‘big-boned’ policy line that will further deepen economic crisis

Akahata editorial

The government Fiscal System Council chaired by Nishimuro Taizo, the Tokyo Stock Exchange chairman, presented its proposal on the FY 2009 government budget to the Finance minister.

The proposal was made at a time when the Japanese economy, which is heavily dependent on exports, is experiencing a serious downturn after the financial speculation bubble burst in connection with the financial crisis in the United States. This reveals the fundamental defect of the government’s “structural reform” policy that has assisted large exporters and has excessively relied on the U.S. consumers’ spending spree during the economic bubble.

The task for the budget allocation for the next fiscal year starting on April 1, 2009, should be to protect people’s well-being and change the basic direction of economic development to one of being led by increased domestic demand. Nevertheless, the Fiscal System Council persists in the “structural reform” path that has failed.

Upside-down fiscal management

The Fiscal System Council proposal calls for the 2006 Basic Economic Policy, known as “Big-boned policy”, to be retained. It also demands that the mid-term economic program, which will be compiled by the government and the ruling parties in late December, clearly set forth the need to secure a “stable fiscal source,” which translates to a consumption tax increase.

The 2006 Basic Economic Policy called for slashing 220 billion yen in the annual growth of expenditure on social services while spending three trillion yen on the U.S. military realignment in Japan, including the construction of a U.S. military base in Guam. The Fiscal System Council also calls for more tax breaks for large corporations and major banks, ostensibly to increase Japan’s international competitiveness.

Thus, the Fiscal System Council calls for a fiscal policy of helping large corporations prosper and more tax money to be used for military buildup at the U.S. beck and call. It completely ignores the need to boost the household economy that is essential for increasing domestic demand.

This upside-down approach has degraded Japan’s social services to the lowest level, comparable to that of the United States, among the industrial countries. As a result, social services to assist people’s daily lives have been undermined as clear from the collapse of medical services, increasing inaccessibility to nursing care services, and the crisis of the pension systems. A Cabinet Office survey shows that 70 percent of those surveyed feel uncertainty about their future.

The pension system has been adversely revised. The elderly aged 75 and over are forced to pay more for their health insurance. The fixed-rate tax cut was abolished. The elderly are now forced to pay more in taxes. Thus, the household economy is being overburdened. In contrast, large corporations have been given tax breaks of five trillion yen ? four trillion yen in corporate tax cuts and one trillion yen in tax breaks for R&D.

What we need now is for the government to break away from the “structural reform” policy as well as the Basic Economic Policy line. The Fiscal System Council emphasizes that Japan’s fiscal deficit is the worst among the industrialized countries. But we must know that if the government clings to the failed policy, it will only sharpen and prolong the economic recession, leading to a drop in tax revenues and an increase in expenditure for boosting the economy. The consequence is an increase in fiscal deficits.

Numbers game that has failed

The national and local debts accounted for 94 percent of GDP in 1996. After the consumption tax rate was raised in 1997, the debts jumped to 170 percent of GDP. The numbers game forcing the public to pay more in taxes and fees for services has failed.

The Fiscal System Council, which is steering the “structural reform” policy, is made up of many members from the financial circles. There is no room for the Fiscal System Council to play a role.

At the G20 summit in Washington, D.C. on November 15, Japanese Prime Minister Aso Taro proposed adopting “policies to rein in consumption in countries with excessive levels of consumption and dependence on borrowing and a transition to self-sustaining, domestic demand-led growth models in countries with heavy dependence on external demand.”

However, the pressing need is for Japan itself to change its policy from one of dependence on foreign demand (exports) to one of increasing domestic demand.

? Akahata, November 27, 2008