Prime Minister Ryutaro Hashimoto's financial reforms will not work effectively unless they are coupled with drastic downsizing of the government's fiscal investment and loan program, a private economic think tank said in a report released Mar. 13.

Japan Economic Research Institute, supported by four major economic organizations, said the program should be streamlined considerably, through such measures as privatizing postal savings and postal insurance, letting government-affiliated corporations raise funds directly from capital markets by issuing bonds and stopping the use of public finance to boost the economy. "The Big Bang will not be able to strengthen Japan's capital markets and private financial institutions' competitiveness if the government maintains a large-scale financing mechanism of its own," said Kazuhito Ikeo, professor of economics and finance at Keio University who coordinated the compilation of the report.

The program uses postal savings and postal insurance, which together occupy some 31 percent of total savings by individuals, to offer loans to support business of small, growing firms and foreign firms that have difficulty raising funds in Japan. This could result in justification of the private financial institutions' insufficient and inadequate functions, the report says.