Cabinet Lineup Shows Kan's Resolve for Fiscal Reform

Tokyo, June 8 (Jiji Press)--New Japanese Prime Minister Naoto Kan
has given key cabinet posts to politicians putting an emphasis on fiscal
discipline, signaling his aim to prepare ground for drastic tax system
reforms including a hike in the consumption tax rate.
"The government cannot take bold action if its finances are weak,"
Kan told a news conference Tuesday. "Rebuilding the debt-ridden state
finances is a prerequisite for economic growth."
Kan named Yoshito Sengoku chief cabinet secretary who will act as
main coordinator in the cabinet. Yoshihiko Noda was promoted to finance
minister from senior vice finance minister.
Sengoku, along with Kan, is one of the key figures who have led
discussions on a future consumption tax rate hike, a topic many politicians
tend to avoid since such a move is believed to be unpopular among voters.
Noda was very harsh in requesting government agencies and
ministries to sharply cut their spending requests when the government
compiled its fiscal 2010 budget.
Kan named Koichitro Genba chairman of the DPJ's revived Policy
Research Committee.
Genba led the creation last month of a group of more than 100 young
and middle-ranking lawmakers for discussions on fiscal issues.
Welcoming the appointments of many politicians in favor of fiscal
consolidation to the key posts, a senior Finance Ministry official said,
"Discussions on fiscal reconstruction will make significant progress."
Kan stressed his confidence that Japan can find a way to strengthen
its economy, and its fiscal and social security systems in a comprehensive
manner.
Criticizing economic measures adopted by the previous Liberal
Democratic Party-led governments, Kan said the economic stagnation over the
past 20 years resulted from the failures of both pork-barrel politics backed
by massive public works spending and a strategy of promoting structural
reforms including deregulation under a small government.
Kan said he will take a different avenue, unveiling an idea that
the government, at a time when personal consumption and corporate capital
spending remain weak, should raise taxes to procure funds for investment in
growth sectors such as the environment, medical and nursing care services,
and tourism, thereby creating new jobs and deamnd, and achieving economic
growth as a result.
"Even if taxes are increased, the economy will improve as long as
the resources raised through the hikes are spent appropriately," Kan said.
However, his idea is not popular among economists. They say that
the government should not interfere too much with activities that are
supposed to be led by the private sector.
"The government's ability to identify growth sectors is limited,"
Taro Saito of the NLI Research Institute said.
If the government's investment fails, it would distort fund
distribution and the country's fiscal deficit could increase further as a
result, Saito warned.
Kan's idea drew skepticism also from a key minister upon the launch
of his cabinet on Tuesday. Shizuka Kamei, who was retained as postal reform
and financial services minister, told a news conference that economic growth
should precede fiscal reconstruction.



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