Asia Times: Tokyo sharpens the knife


	May 3, 2001	atimes.com

Japan

Tokyo sharpens the knife

TOKYO - The government may cut fiscal 2002 general expenditure by 2 trillion yen (US$16.4 billion) and local tax grants by 1 trillion yen from current projections, Finance Minister Masajuro Shiokawa said on Tuesday.

The planned reductions aim to achieve Prime Minister Junichiro Koizumi's goal of reducing the value of government bond issuance to below 30 trillion yen a year.

If the cuts are made, general expenditure for fiscal 2002 would fall 2.5 percent below current-term levels to about 47.5 trillion yen. Under the plan, local tax grants would total about 18 trillion yen.

The 16.8 trillion yen in such grants in the fiscal 2001 budget is expected to rise to 19.5 trillion yen to cover "hidden debts" incurred by the special account for local taxes. To bring the figure down to 18 trillion yen, the government may have to scrap some local public works projects.

Regarding the idea of injecting more public funds into financial institutions, Shiokawa expressed a positive attitude, saying, "If financial institutions ask the government for public funds, we will accept their request."

He was ambivalent toward the idea of using tax reforms to revitalize the securities markets. He said regulations will be amended in the current Diet session to make capital gains of up to 1 million yen tax exempt, but he said that tax cuts under the self-assessment method should not be discussed now, suggesting that the idea requires further examination along with other tax-reform plans.

Koizumi plans to propose structural economic reforms that will spare no sector in his May 7 policy speech, government sources have disclosed. Koizumi will announce his intentions to have banks dispose of their bad loans within two to three years, and to limit new government bond issuances to no more than 30 trillion yen a year.

In a break with former prime ministers Keizo Obuchi and Yoshiro Mori, his speech will not mention any efforts at economic management geared toward stimulating the economy, on the grounds that the nation has to forge ahead with structural reforms to ensure growth over the medium and long term. The prime minister will propose providing an enhanced safety net in the form of improved unemployment insurance benefits and vocational training programs in anticipation of increased unemployment, which is expected to result from such reforms. He will also ask the public to understand the need to share the pain during the reform process.

Koizumi will promise to protect the environment, promote recycling and encourage women to play a greater role in society.

Regarding national security, the prime minister will reiterate his commitment to the Japan-US alliance, and the policy of strengthening ties with neighboring nations. He is also expected to announce plans to draw up legislation dealing with national emergencies with consent from the coalition parties, and to "study" the possibility of Japan engaging in collective security.

Japanese firms in various sectors are accelerating efforts to slash their work forces, anticipating further deregulation and trying to cope with the weak economy and banks' resolve to clear bad loans from their balance sheets.

Many companies are stepping up streamlining efforts, taking their cue from the new Koizumi government, which is emphasizing that there can be no economic recovery without structural reform.

Tohoku Electric Power Co expects by the end of this fiscal year to achieve its goal of reducing its work force by 1,000, moving up the target year by two years. As a result, it has raised its target figure by 500, so that it will have a work force of 13,000 by the end of fiscal 2003. By doing so, the utility aims to raise its return on assets to above 4 percent by fiscal 2003 and to reduce its current 2.6 trillion yen in interest-bearing liabilities by about 250 billion yen.

Tokyo Electric Power Co plans to shrink its work force at the parent from about 41,400 at the end of fiscal 2000 to about 40,000 at the end of fiscal 2003. Chubu Electric Power Co has slashed 1,600 jobs in the three years starting in fiscal 1998, and Kansai Electric Power Co plans to cut 1,000 jobs in five years starting in fiscal 1998.

The liberalization of electric power retailing to large-lot users is forcing power companies to further enhance their operating efficiency. Labor costs comprise just a small portion of operating costs at power utilities, and job cuts have been unheard of until recently. But the traditional method of reducing capital investment is no longer sufficient to enable these firms to bolster their profitability.

Nippon Telegraph and Telephone Corp, suffering from a decline in profitability due to ongoing deregulation and the resulting entry of new common carriers into the market, is taking similar measures. Specifically, it will slash by more than earlier planned the payrolls at its two regional arms, whose profits have been shrinking due to intensifying price competition.

The telecommunications giant will spin off its divisions that provide telecom services as well as handle maintenance and supervision as early as next summer, and will transfer several tens of thousands of workers to those units. NTT announced in spring 1999 that it would by fiscal 2002 reduce its total work force at the two regional units, which numbered 128,000 as of July 1999, by 21,000. It has since boosted the target to 27,000.

Chemical firms, expecting stiff competition from foreign rivals due to the lowering of import tariffs on general-use synthetic resins by 2004, have started strengthening their finances by trimming personnel. Mitsui Chemicals Inc aims to reduce its 5,400-member work force by 300 by the end of this fiscal year before the planned business integration with Sumitomo Chemical Co is completed in 2004. Similarly, Showa Denko KK has decided to slash about 800 jobs by the end of 2002.

NGK Insulators Ltd plans to reduce by 200 the 550 employees at a division handling insulators for power companies by the end of fiscal 2004. It will halve the number of personnel at its two key domestic bases, and also cut its research and development and sales staff significantly. It aims to shift surplus employees to businesses with growth potential as well as improve its competitiveness.

(Asia Pulse)

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