Japan moves to shrink public sector

Koizumi wants public corporations closed - but bureaucrats are fighting him

The cabinet of Japanese prime minister Junichiro Koizumi has given the nod to plans to shut down or sell off seven of the publicly-owned corporations which have become legendary for pork-barrel politics.

The decision comes after months of infighting between ministers and officials, as part of a running fight over thinning Japan's bureaucracy.

The fight has already come close to costing the foreign minister, Makiko Tanaka, her job.

If the move is successful, it could cut up to 1 trillion yen ($8bn; £5.7bn) off government spending. The finance minister, Masajuro Shiokawa, has already pledged to strip that sum out of next year's budget.

But that still leaves 156 other state-backed companies - partly because several cabinet members have been fighting their ministries' corner, resulting in a report earlier this year which vacillated on many of the firms' prospects.

"We still have a long way to go," admitted Yasuo Fukuda, the chief cabinet secretary - although he called the cabinet approval a "breakthrough".

Reform

The plan is a key part of Mr Koizumi's pledge to rein in public spending, keep borrowing under control by capping new bond issues at 30,000bn yen and getting bank bad debts down to manageable levels within three years.

Despite the pain that the long-overdue reforms will cause, the public seems to approve.

Mr Koizumi's apparent willingness to bite the bullet after years of procrastination by a succession of charisma-free leaders of his Liberal Democratic Party translates into popularity ratings approaching 80%.

The agencies concerned are notorious for guzzling public money on huge infrastructure and other projects which often owe more to politicians' desire to buy favour in their constituencies than to genuine need.

In line for the chop are the Japan National Oil Corporation, the Urban Development Corporation and the Housing Loan Corporation.

And on the privatisation shortlist are the Japan Highway Public Corp, the Metropolitan Expressway Public Corp, the Hanshin Expressway Public Corp and the Honshu-Shikoku Bridge Authority.

The JNHC in particular is famed as a home for super-annuated bureaucrats seeking a comfortable semi-retirement.

Its debts amount to more than 26,000bn yen after years of building unwanted roads as part of politically-motivated stimulus packages.

The other transport groups are different in scale, but not in style.