The Politics of FILP Reform, 1990–2001
As Japan entered a decade of slow economic growth at the beginning of the 1990s, the balance that the government had reestablished during the 1980s between fiscal reconstruction and pork-barrel spending gradually came undone. Tax revenues declined, and pressure for fiscal stimulus grew. Still, in its most basic aspect, the government’s approach to FILP did not change. The government continued to attempt to limit budget spending to the extent possible by leaning on FILP, which for most of the decade continued to experience rapid growth. What did change, though, was that during the 1990s the contradictions of using FILP in this manner became impossible to ignore. The collapse of Japan’s economic bubble and prolonged economic stagnation added to the financial pressures building within the FILP system. FILP itself came under increasing political attack, and the issue of reforming the various parts of the FILP system emerged as a divisive political issue both within the conservative camp and across party lines. This, rather than the government’s use of FILP, is the focus of the current chapter.
Ironically, the opposition to FILP grew out of what had made FILP such a useful instrument for the government in the first place: a rapidly growing, nonbudgetary mechanism for directing finance. Criticisms of the FILP system fed into growing momentum for administrative and financial reforms. These pressures were amplified by external changes, both economic and political, over the course of the 1990s. In the face of such pressure, the challenge for the government was to deliver reform without undermining the LDP’s support base. In the sections that follow, this chapter explains how the issue of FILP reform emerged on the political agenda and then