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to audit by the BOA, or may ask questions or demand appearance before it of a person concerned (Art. 26).

4.5.5. Enforcement of findings

In cases where the BOA deems, as a result of an audit, that an official in charge of government financial transactions has caused a grave loss to the government intentionally or through gross negligence, it may make a demand for disciplinary action against the official, to the head of the line ministry concerned or to other persons responsible for supervising him/her (Art. 31). In cases where the BOA adjudicates that a cash-handling official or a goodshandling official is liable to pay an indemnity, the head of the line ministry concerned is required to order him/her to pay the indemnity in accordance with the adjudication made (Art. 32). Furthermore, in cases where the BOA deems that an official in charge of government financial transactions has committed a crime while discharging his/her duties, the BOA is required to notify the Public Prosecutors Office of the matter (Art. 33).

Notes

1.The new Cabinet Office is part of three interrelated organisations: the new Prime Minister’s Office (secretary and advisors), the Cabinet Secretariat (a small number of officers, about 50 to 100, dealing with strategic issues of the government), and the Cabinet Office (dealing with a wide range of issues; like a ministry in size).

2.The major members of the Cabinet, currently 17, include the Prime Minister, the Minister for Public Management, Home Affairs, Posts and Telecommunications, the Minister of Justice, the Minister of Foreign Affairs, the Minister of Finance, the Minister of Education, Culture, Sports, Science and Technology, the Minister of Health, Labour and Welfare, the Minister of Agriculture, Forestry and Fisheries, the Minister of the Economy, Trade and Industry, the Minister of Land, Infrastructure and Transport, and the Minister of the Environment. See the Internet site for more details: www.kantei.go.jp/foreign/constitution_and_government/the_cabinet_law.html.

3.For more details, see the Internet site www.kantei.go.jp.

4.The CEFP is a representative council within the Cabinet Office set up at the time of the Administration Reform 2001. The purpose of the CEFP is to allow the Prime Minster to show full leadership on economic and fiscal policies, fully reflecting the opinions of knowledgeable persons. Members consist of the Prime Minister (Chairman), the Cabinet Secretary, the Minister of Economic and Fiscal Management, the Minister of Finance, the Minister of the Economy, the Minister of Public Management and Home Affairs, the Governor of the Bank of Japan, and four people from outside the government.

5.The Law of Decentralisation 2000 amended this. As from fiscal year 2006, prefectures and municipalities must consult with the Ministry and prefectures respectively. If the Ministry and prefectures do not agree on the bond issuance,

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prefectures and municipalities may still issue public bonds, provided they report in advance to the parliaments of the prefectures and the municipalities.

6.These budgets are submitted to and approved by the Diet at the same time although they are compiled separately. The general account budget, commonly referred to as “the budget”, consists of the government’s major programmes, such as public works, social security, education, science, national defence, and economic co-operation. All national taxes, even if shared with local governments, are treated as revenue of the general account except for several earmarked taxes, including road taxes.

7.Examples include the National Life Finance Corporation, the Government Housing Loan Corporation, the Agriculture, Forestry and Fisheries Finance Corporation, the Japan Finance Corporation for Municipal Enterprises, the Japan Bank for International Co-operation, and the Development Bank of Japan.

8.The guidelines set out the ceilings of expenditure requests for the whole budget, including public works and social security, for the next fiscal year. These ceilings are usually expressed in terms of absolute or percentage increase (decrease) compared to the previous fiscal year’s amount. Also, the guidelines specify the government’s fiscal target, the policies proposed, and the procedures for the preparation of the sectoral budget.

9.The assumptions underlying the Ministry of Finance’s plan are available on the Ministry’s Internet site, notably www.mof.go.jp/english/budget/brief/2004/2004f_04.htm.

10.Ministries within the executive branch submit budget estimates to the Ministry of Finance (i.e. from one ministry to another ministry), while the Diet, the Court and the BOA submit them to the Cabinet (i.e. from one constitutional organisation to another constitutional organisation).

11.This article is ambiguous, as the term “budget” includes both revenues and expenditures. Interpreted literally, it means that proposals to either increase spending or revenues need Cabinet consideration. On the other hand, since the law does not discuss possible decreases of the “budget”, the question arises as to whether the Diet is empowered to reduce taxes without Cabinet consideration.

12.There have been only four times since the end of World War II that amendments have been made (Tanaka, 2003).

13.Article 3 of the PFA has been suspended by special legislation (the Act Concerning the Exception to Article 3 of the Public Finance Act 1948). It says that “the Government can decide or revise the prices stipulated by the Art. 3 of the PFA without legislation or Diet approval as long as the current situation of economic emergency remains.”

Bibliography

Council of Local Authorities for International Relations (2002), Local Government in Japan, Council of Local Authorities for International Relations, Tokyo.

IMF (International Monetary Fund) (2001a), Japan: Report on the Observance of Standards and Codes – Fiscal Transparency Module, IMF, Washington DC.

IMF (2001b), Government Finance Statistics Manual 2001, Statistics Department, IMF, Washington DC.

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Ministry of Finance (2004), Understanding the Japanese Budget 2004, Ministry of Finance, Tokyo, www.mof.go.jp/english/budget/brief/2004/2004.htm (in English).

OECD (2000), Economic Surveys of Japan, OECD, Paris.

OECD (2003), Economic Outlook 74, OECD, Paris.

Tanaka, Hideaki (2003), “Fiscal Consolidation and Medium-term Fiscal Planning in Japan”, OECD Journal on Budgeting, Vol. 3, No. 2, OECD, Paris, pp. 105-137.

ISSN 1608-7143

OECD Journal on Budgeting – Volume 4 – No. 3 © OECD 2004

Korea*

*This study has benefited from comments from: Hong Sang Jung, Director in the Ministry of Planning and Budget; several officials from the Ministry of Finance and the Economy and from the Board of Audit and Inspection; and OECD colleagues including Sang-In Kim (from the Ministry of Government Affairs and Home Administration).