Koizumi promises to slash costs

By Staff and wire reports

TOKYO, Japan -- Japan's new Prime Minister Junichiro Koizumi has promised to slash costs in his first budget, also pledging to push ahead with plans to reform a "sacred cow," Japan's road-construction taxes.

In a joint interview with Jiji news agency and the Yomiuri Shimbun newspaper, Koizumi said he wants to cut spending for Japan's state-backed corporations in the budget for the next fiscal year, which starts in April.

Koizumi swept to power on promises of reforms and lower government spending. Despite his record popularity, though, Japanese markets have given up their "Koizumi effect" gains and still await true signs of reform.

Better use of tax revenue

The prime minister said he wanted a comprehensive review of the 77 state-backed companies' operations, to use tax revenue better. He said he would trim unnecessary costs, possibly through consolidation or privatization.

But he added: "I don't know yet how much money we will try to cut."

The budget for this fiscal year, which runs through next March, sets aside $43.8 billion (5.27 trillion yen) for state-owned entities. Critics have long cast them as money wasters.

Earlier this month, Koizumi reportedly instructed Nobuteru Ishihara, the minister in charge of administrative reform, to consider a major reduction in spending on the corporations.

Ishihara is leading a review, and the government plans to compile a report in June.

A "symbolic" issue

Also Thursday, Koizumi promised to redirect auto-related tax revenues. By law, they are set aside for road construction projects.

The taxes are estimated at 5.8 trillion yen for the 2001 fiscal year. Critics say they are a funding source for unnecessary, pork-barrel projects.

Up until now, they have been a "sacred cow," he said. But he has promised reforms for what he calls a symbolic issue.

"This year it's different," he said.

Koizumi admitted his proposal faces strong opposition from members of his own party. He said he wanted to reach an agreement with the ruling Liberal Democratic Party before the Upper House elections in July.

"I first want to reach an agreement that the issue needs to be reviewed and then we will consider how to review it after the Upper House elections," Koizumi said.

The road-tax issue is a key component of Koizumi's reforms.

The prime minister hopes putting them to other uses would make the budget efficient. The government is otherwise tied because he has pledged to cap the amount of bonds it issues.

Reuters contributed to this report.

Note: Pages will open in a new browser window

External sites are not endorsed by CNN Interactive.