Following weeks of turf battles, Cabinet ministers and ruling coalition executives finally reached agreement Wednesday on how the national government will cut its subsidies to local government projects by 1 trillion yen in fiscal 2004.
The development marks a major step forward in Prime Minister Junichiro Koizumi's "Trinity Reform" plans, aimed at reviewing the debt-ridden finances of the national and local governments.
"We roughly reached agreement," Chief Cabinet Secretary Yasuo Fukuda told reporters after the second meeting of the day involving the Liberal Democratic Party and New Komeito.
He and other participants said the planned reduction stems mainly from subsidies for public works projects, nursery schools and personnel expenses for public schools.
They did not state, however, how much each of these categories would be slashed.
Koizumi announced last month that the government was aiming to slash these subsidies by 1 trillion yen in fiscal 2004, adding that part of the reduction would be financed by local taxes.
The question of how much the national government should subsidize social welfare expenses had been the final sticking point.
Although the Health, Labor and Welfare Ministry proposed reducing subsidies for social welfare payments from 75 percent to 66 percent, the idea was fiercely opposed by local governments, which said the step would only shift the burden onto localities.
According to Wednesday's agreement, the health ministry will lessen the margin of reduction in subsidies for social welfare payments from the original plan, and cut part of the fees for operating nurseries to make up for it.
Information from Kyodo added