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The government is establishing massive funds one after another to promote its signature policies, such as decarbonization. As long as taxpayers’ money is involved, the government should strictly check whether it is being used effectively.
An expert panel of the Finance Ministry proposed that government ministries and agencies thoroughly control the handling of government funds under their jurisdiction. This is because the government’s spending on these funds, which used to be about ¥1 trillion a year, has ballooned sharply since fiscal 2020.
Much of the money was earmarked in large supplementary budgets compiled for measures against the novel coronavirus pandemic. From fiscal 2020 to 2021, a total of ¥17 trillion was set aside for funds dealing with such issues as the development of decarbonization technologies, support for small and midsize companies, and bringing semiconductor factories to Japan.
Prime Minister Fumio Kishida has advocated rectifying the adverse effects of the “single fiscal year approach” to the budget, in which government bodies try to use up their entire budget within a fiscal year. Kishida intends to utilize the funds to secure financial resources to cover multiple fiscal years.
It is understandable for Kishida to aim at flexibly allocating money to important fields, without being bound by the single fiscal year approach. The question is whether transparent management can be ensured.
National funds are pooled from government finances, and subsidies and loans are provided to companies and other entities. In principle, the national budget must be presented to the Diet each fiscal year for approval of how the money will be spent. In the case of funds, once approval is gained for putting money into them, Diet approval for specific expenditures is not required.
This makes it difficult to monitor funds. The management and operation of funds are delegated to independent administrative agencies and other entities, and in some cases, they are said to have been sub-commissioned to the private sector. The responsibility of each ministry and agency is unclear.
There have been a number of slipshod cases in which the government established funds but they have not been used effectively with money spent only on operational costs.
Since fiscal 2007, the Land, Infrastructure, Transport, and Tourism Ministry has put ¥730 million into the “town revitalization fund” for supporting businesses that develop port facilities. However, over the past 14 years, only ¥63 million in one case was spent from the fund.
As for a fund set up by the Economy, Trade and Industry Ministry for guaranteeing loans to small and midsize companies, the Board of Audit said in 2019 that approximately ¥20.2 billion in the fund was not expected to be used, and demanded that this amount be returned to the national coffers.
If the number and amount of funds is to be increased, there is an urgent need to strengthen the monitoring system.
Starting this fiscal year, the government is said to have introduced a system in which each ministry and agency discloses expenditures and fund balances on a quarterly basis for major funds under their jurisdiction. Responsibilities regarding the funds must be clarified, and the use of the funds and their effectiveness must be carefully explained to the public.
More medium- and long-term issues are emerging, such as decarbonization and digitization. The government should not rely just on funds, but also deepen discussions on the implementation of budgets to overcome the adverse effects of the single fiscal year approach.
