The MOF elaborated the government’s commitment to ‘big cuts in the PW budget by undertaking a strict priority ranking of projects’ taking into consideration whether or not there was a real public need for a project and the goals of making Japan more internationally competitive and improving the quality of life.

What resulted was the biggest-ever annual reduction in the PW budget, from ¥7.070 trillion to ¥5.773 trillion, or 18.3 per cent. Japan now has its lowest General Account PW budget since 1978.

The Hatoyama administration has in fact continued a trend of PW spending cuts that began in 2002 under the Koizumi administration and which continued under the Abe and Fukuda administrations. The Asō government’s 2009 PW budget was an exception where PW spending rose by 5 per cent, reflecting the government’s fiscal stimulus program.

By sector, the biggest falls in the PW budget are in spending on ‘infrastructure for local vitality’, sewage projects, housing measures, and agricultural and rural development.

However, these ostensibly hard-hit sectors are eligible for supplementary funding under the central government’s ‘comprehensive grant for social infrastructure development’ and the ‘agricultural, mountain and fishing village regional development grant’. These funds, paid directly to local governments, go some way towards offsetting the decrease in allocations from the central ministries. So, while the overall PW budget declined by 18.3 per cent on 2009, offsetting grants paid directly to local governments (for the same kinds of projects) ensure many targeted sectors are not significantly worse off.

For example, the ‘comprehensive grant for social infrastructure development’ can be used by local governments in areas such as roads and ports, basic infrastructure (flood control, sewage and coastal works), urban development including parks, and local housing assistance. The grant was created by integrating PW subsidies distributed by MLIT for specific types of projects (roads, flood control, coastal works, town development, sewage, housing and ports etc., which were abolished in principle) into one comprehensive grant that local governments could utilise freely and creatively.

The direct grant to local governments also goes some way towards easing the pain of PW cuts in the agricultural, forestry and fisheries sector. If the 2009 and 2010 allocations are compared, then without the ¥150.0 billion grant, 2010 would see a 50 per cent decline in funding. However, once the regional development grant is factored in, that decline falls to 34 per cent.

Criticism of the 2010 budget’s PW allocations have centred mainly on the Hatoyama’s administration failure to honour earlier commitments. The Nikkei reported that only four out of 200 roads listed earlier for scrapping or major funding cuts ended up being completely scrapped. The government’s change of mind was reportedly due to appeals from governors of rural prefectures accompanied by ruling coalition lawmakers from local constituencies who appealed to senior MLIT officials to reinstate the roads in their home districts.

According to the Asahi, however, the appeals came through the Ozawa office. It reports that MLIT Minister Maehara laid down the principle of freezing new construction work on road development in October 2009. In November prefectural governments were notified that about 150 routes would be candidates for a budget freeze with the focus on roads that could not be expected to be completed in under three years. However, the office of the DPJ Secretary-General (namely Ozawa), which received petitions from local governments, demanded restoration of the road budget. Reflecting this request, small budgetary sums were distributed to almost all routes.

At the same time, MLIT approved full central government subsidies for the construction of five dams to be built by local governments, when Minister Maehara had earlier called on them to reconsider 58 dam projects. The reason for making an exception for the five dams was because construction had already begun on them in 2009 and so the DPJ government continued the financial commitment of the previous government.

While the DPJ has made a modest cut to government spending on PW, it has by no means turned off the funding tap. It is committed to ‘both concrete and people’, an ill-afforded luxury in Japan’s current fiscal circumstances. The government is also susceptible to political appeals channelled through the party, continuing the tradition of party intervention in policymaking and confirming its ‘LDP lite’ image. It may be honouring its commitment to greater regional sovereignty with direct PW grants to local governments, but whether or not an 18 per cent cut in the PW budget is ‘large-scale’ is debateable. Moreover, it is far from clear that all the PW projects the Hatoyama government has approved would stand the test of eliminating so-called ‘wasteful expenditure’.