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Japan Approves Austerity Budget - 2001-08-10

Japan's cabinet has approved budget guidelines that include drastic cuts in government spending for the next fiscal year.

Prime Minister Junichiro Koizumi's pledge to reign in government debt took a major step forward Friday when his cabinet approved more than $7 billion of cuts in Japan's next budget.

The nearly two percent cut in government spending beginning April 2002 is the first reduction in four years.

In keeping with the prime minister's election promise to cut unnecessary projects, the cabinet endorsed a 10 percent cut in public works spending. Ten percent will also be shaved from Japan's foreign aid budget.

Other sectors were allocated increases, including urban development, science and information technology, areas the government argues are crucial to modernizing the economy.

Almost $6 billion have been earmarked for expected increases in social security for Japan's aging population.

While Mr. Koizumi argues expenditure cuts are needed to solve the country's long-standing economic problems, not everyone was happy with the guidelines.

Unemployment is widely expected to exceed five percent as Mr. Koizumi pushes ahead with economic reforms that are designed to pull Japan out of its worst economic slowdown since World War Two.

Politicians with close connections to the construction industry seized on that assessment Friday, arguing that proposed cuts in public works projects next year will only worsen the problem of unemployment.

Details of the closely-watched draft budget still need to be fleshed out and approved by Parliament before they take effect.