Six months into his economic reform campaign, Prime Minister Junichiro Koizumi is doing a fairly good job. Determined to reduce public debt, he has kept his promise to limit new bond sales for the fiscal year 2001 to no more than 30 trillion yen. At the same time, in an urgent move to help the growing number of laid-off workers he has implemented a supplementary spending budget with a focus on unemployment relief and job retraining.

Also, in a bid to shore up a slumping economy he has ordered the preparation of a new stimulus package. With scheduled debt issues for the current fiscal year already reaching the limit, however, Mr. Koizumi has resorted to an unconventional -- some would say unwarranted -- method of generating funds: tapping into the sinking fund for bond redemption. Thus, at least in name, he has stood by his 30-trillion-yen debt limit.

He had a different and better option. With the economy stuck in deepening deflation, he could have temporarily lifted the self-imposed debt ceiling. That would have made more economic sense than drawing down the sinking fund. Money diverted from the fund is borrowing in disguise; it must be paid back in the future, just as bonds issued must be redeemed. The net effect of such backdoor borrowing -- raising the debt level -- is the same as selling more bonds.