Koizumi Talks of More Reforms -- Theme: "Leave to the Private Sector What it Can Do"

by: Steven Towns

It's too bad Japan's Prime Minister Junichiro Koizumi will have no choice but to leave office this fall. He is in the last year of his second term and only lately have we started to see the positive effects of his reform-minded policies. The fundamentals behind the improving economy are picking up steam as has the stock market. One question is what happens post-Koizumi? In fact, "post Koizumi" was one of three key phrases for '06 chosen at the start of the year along with: "exiting deflation" and "stock boom." Below are the reforms Koizumi mentioned in his most recent email newsletter.

March 9, 2006 [my emphasis added in bold]

Another essential item on the Diet's agenda alongside the budget is
administrative reform. We can even dub it the "Diet for the
Promotion of Administrative Reform." Grounded on the policy of
"leave to the private sector what it can do," I will strive to
reassess the government's work and realize a "simple yet efficient
government" with a view to reducing the tax burden on the people.

First, in order to drastically reduce the size of the government,
I have decided to reduce the number of civil servants by around
5 percent over the next five years
. Although the Government had
been taking measures to reduce the number of civil servants nearly
every year, it was only able to reduce the number by around 0.1
percent annually at most. Indeed an annual 1 percent reduction, or
5 percent over a five-year period, is a very ambitious goal. In the
past five years, the Government has achieved a net annual reduction
of around 500 civil servants on average. Now the goal is to reduce
six times that number, or more than 3,000 civil servants annually.
Nevertheless I am resolved to work hard to achieve this goal.

I will also reform government-related financial organizations.
There are several government-related financial organizations in
parallel with the administrative areas of each ministry. Most of
them will be integrated into one organization, and the rest will be
completely privatized. When I endeavored to reform special public
corporations including privatizing highway-related public
corporations in 2001, there was strong opposition from even the
ruling parties, saying that they would not allow even one finger to
be laid on government-related financial organizations. Five years
have passed since then and I am finally able to start reforming the
financial organizations.

I will also aggressively promote the sale of state-owned assets.
There are some housing units for civil servants in the central area
of Tokyo which should be sold and there are other areas of
state-owned land around the country which are not being used to the
maximum efficiency. I have already instructed that concrete plans
be formulated to address this situation.

I have been promoting drastic reductions in expenditures of the
general account
. For instance, expenditure on public works projects
which stood at 14.9 trillion yen in FY1998 has been cut down to 7.2
trillion yen in FY2006. In addition to the general account, state
finances also consist of special accounts, and there still remain
many items that need to be reviewed regarding special account
expenditures. I have decided to drastically reduce the number of
special accounts over the next five years or so from the current 31
to one-half to one-third that number

Based on the policy of leaving to the private sector what it can do,
including public works and services, the Government has begun to
consign work to the private sector including employment support
offered by unemployment agencies and guarding the security of areas
surrounding prisons. My intention is to expand the scope of work
consigned to the private sector to include many more sectors.

The Government will submit a bill promoting administrative reform
during the current Diet session in order for it to undertake
concerted efforts towards administrative reform and to advance
these efforts without regressing. I will work hard to get the bill
passed at an early date and steadily advance administrative reform.

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