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Wednesday, Oct. 7, 2009

DPJ finds funds for pet programs

¥2.5 trillion so far to be shifted from LDP's agenda

Staff writer

The administration said Tuesday it will suspend ¥2.5 trillion in the supplementary budget drawn up by the previous government and use the money to bankroll the Democratic Party of Japan's election pledges, including child-rearing allowances and toll-free expressways.

Broken down by ministry, the land ministry will get ¥887.5 billion less than it was expecting, a decrease of 38.1 percent, while the agriculture ministry will miss out on ¥476.3 billion and the health ministry ¥435.9 billion.

The administration will also slash ¥455.2 billion from public works projects, though no specifics on how this cut will be made were forthcoming.

Yoshito Sengoku, minister in charge of administrative reform, said he is eager to find more money and reach the targeted ¥3 trillion.

"Considering the current economy, it is better to redistribute financial resources that benefit the lives of people," Sengoku said at a news conference.

He stressed that such a wide-scale change to a budget already compiled and even partially spent is unprecedented.

Although the funds will be reallocated, Sengoku said the economy will not be affected if the government can direct the money to households.

But some economists aren't so sure.

Minoru Nogimori, an economist at Nomura Securities Co., said changing the direction of the extra budget will likely pour cold water on the economy, which has finally started showing some signs of recovery.

He cautioned that slashing expenditures on public works projects will take away the effect of this kind of spending to give the economy a quick boost.

To get the sluggish economy on a strong recovery track, Nogimori suggested the government should not rush to slash and burn in this area.

On the other hand, he welcomed Prime Minister Yukio Hatoyama's strong leadership in implementing what he pledged during the campaign.

"Although the figure is a little smaller than the initially discussed ¥3 trillion, (the government) succeeded in slashing the (public works) budget to a certain extent," Nogimori said.

Takuji Aida, senior economist at UBS Securities Japan, said suspending the ¥2.5 trillion isn't likely to cause the economy to take another serious second dip.

To help the recovery, Aida said the administration should implement its pledges that are centered on consumption amid weak domestic demand.

To keep loans going to where they are needed, Aida suggested it may be necessary for the government to support the stock prices of financial institutions should they drop precipitously.

The extra budget was formulated by the administration of Taro Aso as a stimulus package.

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The Japan Times

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