Construction of a New Transportation System(Hiroshima-shi)
As we have seen, the FILP is a means of fiscal policy using financial techniques to allocate funds, backed by the system and credit of the nation to promote policy goals. In other words, it is a framework for making interest-bearing loans to institutions targeted for FILP financing and receiving repayment according to contract.
Certain policy areas are especially suited to efficient and effective operations by using this system of FILP financing. The following four areas are representative:
Construction of a New Transportation System(Hiroshima-shi)
1) Policy areas where the beneficiary should be asked to shoulder some burden.
Even in the provision of social infrastructure, when the fund beneficiary can be designated, the most appropriate allocation is not to cover the funds with taxes but to ask the recipient to bear a certain burden. A fine example of this is the tollroads program managed by the Japan Highway Public Corporation, which uses FILP financing to construct public highways and collects tolls to repay the loans.
2) Policy areas where self-discipline is expected.
Financing through long-term, fixed low-interest loans gives a greater incentive for self-discipline in accomplishing policy goals than simply granting subsidies. In addition, these are areas where fund allocation is appropriate and the policy effects are high. For example, the FILP finances policies for small and medium-sized businesses through such FILP bodies as the People's Finance Corporation and the Japan Finance Corporation for Small Business.
3) Policy areas for which the market mechanism is not well suited
In cases where non-economic effects are great but funds and services would not be allocated most appropriately if left to the market mechanism, the government may meet policy goals by providing inducements through policy financ-ing. That is, this is a field in which intrinsically desirable enterprises would not be undertaken since funding would be insufficient if left to private-sector financial institutions.
For example, curbing the emissions of chlorofluorocarbon (CFC) gases is an urgent societal duty. However, because businesses would not increase productivity by refurbishing plant and equipment to reduce CFC use, CFC-reduction measures continue to lag. In such a case, low-interest financing can be an incentive to replace facilities. This kind of environmental-policy financing is conducted through such bodies as the Japan Development Bank, the Japan Finance Corporation for Small Business and the People's Finance Corporation.
4) Policy areas where private-sector economic activity should be encouraged and assisted.
In cases such as housing con-struc-tion, where policy should encourage the private sector, there are many examples of back-up support through interest assistance. There are various merits to using policy financing in such cases. For example, funds can be stably pro-vided regardless of loose or tight lending conditions in the private sector, and fairness and neutrality can be improved. And since long-term fixed-rate policy financing can be offered at low rates of interest compared with private financial institutions, interest can be subsidized with minimal fiscal burden. Housing finance managed by the Government Housing Loan Corporation is an example of such subsidized interest policy.
Oku-Kiyotsu First and Second Power Plants
1) Housing Construction
The FILP has contributed greatly to promoting the construction and improving the quality of Japan's housing stock. It finances construction through the Government Housing Loan Corporation. Housing constructed through the Government Housing Loan Corporation accounts for 36% of the nation's housing construction and 50% of owner-occupied housing.
Bay Square Yokosuka
2) Small and Medium-Sized Business
The People's Finance Corporation and the Japan Finance Corporation for Small Business help small and medium-sized business, lacking in creditworthiness or collateral, to procure funds smoothly. At the same time, in order to help smaller businesses adapt to the changing management environment, the above mentioned institutions provide policy-based finance, supplementing funds from private financial institutions and contributing broadly to strengthening Japan's economic base and activity.
3) Roads
The Japan Highway Public Corporation and other road-related public institutions have promoted the establishment of the system of high-standard arterial expressways and the strengthening of the national multipolar highway network. In addition, such bodies as the Metropolitan Expressway Public Corporation and the Hanshin Expressway Public Corporation maintain the vital traffic infrastructure of major cities and are now proceeding with such projects as improving interchanges and widening roads to ease traffic congestion.
Tokyo Bay Aqua Line (Umi-Hotal and bridge)
Tokyo Bay Aqua line (South Tunnel connection)
4) Railways and Subways
Such entities as the Japan Railway Construction Public Corporation and the Teito Rapid Transit Authority have used FILP funding to promote construction of new rail lines, expansion of existing lines and subway construction. They have greatly contributed to upgrading the rail network and easing rail congestion in major urban areas.
Hibiya Line (Kita-Senju station)
5) Airports
The New Tokyo International Airport Authority and other airport-related government institutions contribute to Japan's internationaliza-tion and regional development by promoting waterfront development projects near Tokyo International Airport (Haneda) and maintenance work at New Tokyo International Airport (Narita). In particular, the Kansai International Airport, opened in September 1994, has made use of FILP funds, with Kansai International Airport Co. receiving loans from the Japan Development Bank and issuing government-guaranteed bonds.
6) Water and Sewerage
Local public organizations are endeavoring to extend sewerage systems to more homes and businesses. And such entities as the Water Resources Development Public Corporation play a major role in providing a steady water supply.
7) Education and Social Welfare
The FILP contributes greatly to education, health and welfare facilities
through Special Account for National School, Special Account for National
Hospital, the Social Welfare and Medical Service Corporation, the Japan
Private School Promotion Foundation and local public organizations. The
Japan Scholar-ship Foundation provides low-interest and interest-free loans
to contribute to developing talented people and equal educational opportunities.
Chikugo Oseki Dam
8) Agriculture, Forestry and Fisheries
The operating environment for Japan's agriculture, forestry and fisheries industry has changed markedly with the liberalization of agricultural imports in the Uruguay Round of trade talks under the General Agreement on Tariffs and Trade (GATT). Against that back-ground and in order to maintain or increase the productivity of agricultural industries and provide a stable food supply, the Agriculture, Forestry and Fisheries Finance Corporation is providing the necessary funding to maintain production infrastructure and improve management structure.
9) Industry and Technological Development
The Japan Development Bank, responding to economic and social conditions, provides financial assistance to supplement private financial institutions in such areas as industrial structure reform, development of new technologies and nurturing new businesses.
Cement Plant (Indonesia)
10) Regional Development
Local public organizations, including the Japan Regional Development Corporation, and the Hokkaido-Tohoku Development Finance Public Corporation, the Okinawa Development Finance Corporation, play a major role in revitalizing local areas by building the social infrastructure for people's daily lives, especially social welfare facilities, and by constructing the public facilities that form the core of regional revitalization.
11) International Cooperation
Amid the global search for a new international order, Japan is expected to facilitate increasing its imports, promoting inward direct investment, solving the accumulated debt problems of developing countries and supporting the development of developing economies. The Export-Import Bank of Japan contributes to building harmonious external economic relations through such means as increasing import financing, providing untied loans and cooperating on financing projects with the World Bank and other international financial institutions.