IV BUDGET PROGRAM BY FUNCTION

(1) Public investment
Facilities that form the foundation of socio-economic activities, the national way of life, and the protection of national land are referred to as "public investment". Among others, they include roads, ports and harbors, housing, water supply and sewerage, and river embankments and dams. In this respect, Japan has a shorter track record than western countries, and, partly due to this, a consistently high level has been maintained in Japan's ratio of public investment to its economic scale. As a result, the various forms of public investment have risen dramatically compared to their former levels.
However, the harsh fiscal situation now makes it even more imperative to make effective use of fiscal funds. Therefore, when developing public investment in future, our priority will have to lie in tackling sectors that are really necessary, as well as pursuing still greater efficiency and transparency.

(2) Structural Reform and Medium-Term Economic and Fiscal Perspectives
    (approved by the Cabinet on January 25th, 2002)
    Public works will be selected with a focus on absolute necessity, and the most efficient system of development will be established.
    The scale of investments also needs to be revised, considering the current harsh fiscal situation, as well as the fact that the scale of public works investment compared to the national economy is extremely high compared to that in other countries, and other factors.

(3) Public works expenditures
    In the General Account of the national government, most public investment expenditures are classified into "public work-related expenditures". In addition to this category, in terms of social infrastructure improvement, there exist construction expenditures for improving social welfare institutions, school facilities, and so on in relevant expenditure categories.
    The public work-related expenditures are mainly composed of expenditures for "Public Works under the Jurisdiction of the National Government" and "Public Works under the Jurisdiction of Local Governments with Partial Support from the National Government". In principle, the national government covers 2/3 of total expenses in the former [the rest is covered by local governments (prefectures, cities, towns, and villages] , and 1/2 in the latter.

[Reference]

Types of public works

The method of implementing public works depends on the entity responsible for the project.

a. Public works under the jurisdiction of the national government
The national government is responsible for these works. In general, the local governments are requested to share part of the cost of these works, except for some national parks, under the assumption that they receive benefits from the works.

b. Public works under the jurisdiction of the local governments with partial support from the national government
These works are implemented by local governments with direct or indirect national government subsidies. Such projects make up the largest share in public works.

c. Public works under the sole jurisdiction of local governments
These works are implemented by local governments, without any national government subsidy, and include works by municipal offices with subsidies only from local governments. In this category, the local government has full authority to adjust projects to suit the special needs of a region.

d. Public works of public corporations
These works are performed by public corporations, such as the Japan Highway Public Corporation

	Prioritization in 4 sectors, adjusted apportionment by project
1.	Priority on measures falling under 4 areas (Progress and utilization of human resource, build attractive urban areas and local areas, aging society and declining birth rate, construction of a environment friendly society).
		Growth rate in budget related to these 4 areas: ¥6,748.9 billion in FY2002 ¥6,879.8 billion (+1.9%) in FY2003
2.	Considering the level of development of the respective social infrastructure, the urgency of development, etc., priority will be given to Japan Coast Guard patrol boats, major urban center airports, purification tanks, three major city loop roads, and so on.

	Review of earmarked funds for roads Due to the severe fiscal situation, the existing provisional tax rate will be extended, and the uses of earmarked funds diversified, with the understanding of taxpayers. A total amount of around ¥350 billion will be used for new areas (debt resolution of the Honshu-Shikoku Bridge Authority: ¥224.5 billion), transfer of tax resources to the regions (¥93 billion), and expansion of uses (¥40 billion).
	Review of long-term plans
1.	The priority in plan formulation will be changed from the conventional "project volume" to the result to be achieved (outcome targets). Plans will in principle be formulated after making revisions, such as not making the total project costs central to the plan.
2.	The system based on the existing Emergency Measures Law will be revised and necessary legislation enacted.
	(1)	In the Ministry of Land, Infrastructure and Transport (MLIT), 9 long-term plans ending in FY2002 and 2003 will be merged into one. The Emergency Measures Law will be abolished, and a Social Infrastructure Development Priority Planning Law (tentative name) will be enacted.
	(2)	Reviews similar to the above will also be applied to other plans (in FY2003, scheduled reviews of plans for waste processing facilities (Ministry of the Environment) and land improvement (Ministry of Agriculture, Forestry and Fisheries), as well as those by the MLIT).
	Review of treasury-subsidized projects
1.	For projects subsidized by the national government, targeted projects will be prioritized and systematic revisions carried out (such as raising the standards for project adoption), in line with the review of role-sharing between central and local governments in "Opinions on Future Directions for Administrative Work and Projects" (The Council for Decentralization Reform, Oct. 30th, 2002). Meanwhile, the burden of national government related to public works will be cut by ¥262.5 billion (-5.6%).
2.	With a view to promoting projects that draw on regional autonomy, new integrated subsidies will be created for 7 projects (for example, making urban area redevelopment projects newly subject to integrated subsidies).
	Cost contraction In addition to the contraction of construction work costs promoted until now, efforts will be made towards comprehensive cost contraction, including reviews of standard criteria, speeding up of projects, and reduction of life cycle costs. The Ministry of Land, Infrastructure and Transport will set a target for comprehensive cost contraction of -15% compared to FY2002 over the five years from FY2003.