ヾ(゜Д゜)ノ"英字新聞
How will govt pay for bloated budget?
The amount of general-account budgetary requests for fiscal 2010 is ballooning, while the shortage of financial resources to fund them is becoming increasingly dire. Unless something is done, the nation's fiscal deficits will keep snowballing.
Government ministries and other government bodies on Thursday resubmitted their budgetary requests for fiscal 2010 to the Finance Ministry. The requests were originally submitted in the final days of then Prime Minister Taro Aso's administration in late August, but new Prime Minister Yukio Hatoyama ordered government offices to reconsider their requests and submit them again.
Requests reach 95 trillion yen.
Total budgetary requests for fiscal 2010 have soared to an all-time high of 95 trillion yen, exceeding the initial budget for the current fiscal year by 6.5 trillion yen.
The amount requested has swelled because conventional budgetary request guidelines were abolished this time, and the requests include expenses needed to implement measures contained in the Democratic Party of Japan's manifesto for the House of Representatives election.
The list of such expenses is long, including 2.3 trillion yen to provide half of the promised child-rearing allowance, 450 billion yen to effectively make high school education free and 600 billion yen to eliminate tolls on some expressways.
The Hatoyama administration declared that implementation of these measures would be given the highest priority. However, criticism that the measures cost too much remains deep-rooted.
Some observers have wondered aloud over whether the generous child-rearing allowance should be provided regardless of parents' income, and pointed out that dropping expressway tolls would cause severe traffic jams and more car exhaust emissions that would fly in the face of measures to combat global warming.
It would be inappropriate to bulldoze these plans into practice without first gaining the consent of the public, even though they are spelled out in the DPJ manifesto.
We think Hatoyama should consider withdrawing or postponing some of his election pledges while next fiscal year's budget is being drafted.
Failure to curb budgetary requests unrelated to the election pledges is another reason for the bloated total. Finance Minister Hirohisa Fujii asked the ministries to reduce the amount of their budgetary requests for conventional policy measures, but they did not listen to him, except for those for public works and other projects.
Some government offices have resubmitted their requests but have deferred clarifying the actual costs for many of their programs, which they are required to show by the end of this year.
The fiscal 2010 budget will inevitably balloon later due to such factors as a request by the Internal Affairs and Communications Ministry to increase local allocation tax grants.
Therefore, the Administrative Renewal Council and the Finance Ministry must be as stingy as possible when assessing whether the requests should be granted.
Pruning the budgetary requests will be difficult; securing the financial resources to implement them will be equally so.
Don't rely on bonds
Tax revenue of 46 trillion yen was initially forecast for this fiscal year, but the economic slump is likely to see this figure clipped by 5 trillion yen to 6 trillion yen. Some observers predict tax revenue could even dip below 40 trillion yen in the next fiscal year.
If these projections became reality, the government would be forced to depend on government bonds. This fiscal year, the issuance of national bonds was set at 33 trillion yen for the original budget. However, the approval of the supplementary budget saw the figure swell to 44 trillion yen.
It seems even more bonds will be issued next fiscal year. If tax revenue remains at 40 trillion yen and spending hits 95 trillion yen as stipulated in the ministries' initial requests, the issuance of national bonds likely will reach 45 trillion yen to 49 trillion yen, even with some nontax revenues likely to trickle into the state coffers.
Hatoyama earlier said the government would observe fiscal discipline and hold down the issuance of national bonds. However, under the present circumstances that will be easier said than done. Much of the blame for this can be directed at Hatoyama for putting off attempts to secure the necessary revenue sources.
If even more government bonds are issued, confidence in the bonds could erode and they might be sold heavily. As a result, interest rates would rise.
This will increase the government's interest payments, aggravating the already severe fiscal situation. Avoiding this unpleasant scenario will require the government to find revenue sources.
Try to find stable revenues
The new government's effort to suspend part of the supplementary budget for the current fiscal year eventually managed to squeeze out 2.9 trillion yen. The intention is to stop wasteful spending and instead use this money as revenue for the next fiscal year. This plan makes sense.
However, some government members are clamoring for a second supplementary budget centered on employment measures. A second supplementary budget would come with an expected price tag of 2.9 trillion yen.
This would be money that would become unavailable for the next fiscal year's budget. The Hatoyama Cabinet will be forced to find a new, alternative revenue source.
The Cabinet must try to secure stable financial sources not only for next fiscal year but also for the midterm and beyond.
First of all, we think the Cabinet should drop its election pledge to abolish the provisionally higher tax rates, such as that on gasoline. Going through with this plan would deprive central and local governments of 2.5 trillion yen a year in stable tax revenue. This is unreasonable.
The consumption tax is the surest financial source. To pay for ever-increasing social security costs, the government obviously has no other option but to raise the consumption tax rate. Doing so would allow the burden to be shared by the public.
The slumping economy means it would be risky for the government to raise the consumption tax rate immediately. But the matter should be discussed now so the rate will be raised as soon as the economy recovers.
The National Strategy Office, which is supposed to present basic policies for compiling budgets and for managing the nation's economic and fiscal policies, has yet to make its presence felt. National Strategy Minister Naoto Kan even said his office would not set new targets for restoring the nation's fiscal health--at least for now.
This stance, however, does not make sense. The lack of clear fiscal reconstruction policies in part allowed budgetary requests to swell.
The Aso Cabinet set a goal of reducing the ratio of outstanding debt held by the central and local governments against Japan's gross domestic product by the early 2020s.
The Hatoyama administration has a responsibility to show the public how it intends to reconstruct the nation's fiscal situation by, among other things, having the National Strategy Office show strong leadership in setting new reconstruction targets.
The amount of general-account budgetary requests for fiscal 2010 is ballooning, while the shortage of financial resources to fund them is becoming increasingly dire. Unless something is done, the nation's fiscal deficits will keep snowballing.
Government ministries and other government bodies on Thursday resubmitted their budgetary requests for fiscal 2010 to the Finance Ministry. The requests were originally submitted in the final days of then Prime Minister Taro Aso's administration in late August, but new Prime Minister Yukio Hatoyama ordered government offices to reconsider their requests and submit them again.
Requests reach 95 trillion yen.
Total budgetary requests for fiscal 2010 have soared to an all-time high of 95 trillion yen, exceeding the initial budget for the current fiscal year by 6.5 trillion yen.
The amount requested has swelled because conventional budgetary request guidelines were abolished this time, and the requests include expenses needed to implement measures contained in the Democratic Party of Japan's manifesto for the House of Representatives election.
The list of such expenses is long, including 2.3 trillion yen to provide half of the promised child-rearing allowance, 450 billion yen to effectively make high school education free and 600 billion yen to eliminate tolls on some expressways.
The Hatoyama administration declared that implementation of these measures would be given the highest priority. However, criticism that the measures cost too much remains deep-rooted.
Some observers have wondered aloud over whether the generous child-rearing allowance should be provided regardless of parents' income, and pointed out that dropping expressway tolls would cause severe traffic jams and more car exhaust emissions that would fly in the face of measures to combat global warming.
It would be inappropriate to bulldoze these plans into practice without first gaining the consent of the public, even though they are spelled out in the DPJ manifesto.
We think Hatoyama should consider withdrawing or postponing some of his election pledges while next fiscal year's budget is being drafted.
Failure to curb budgetary requests unrelated to the election pledges is another reason for the bloated total. Finance Minister Hirohisa Fujii asked the ministries to reduce the amount of their budgetary requests for conventional policy measures, but they did not listen to him, except for those for public works and other projects.
Some government offices have resubmitted their requests but have deferred clarifying the actual costs for many of their programs, which they are required to show by the end of this year.
The fiscal 2010 budget will inevitably balloon later due to such factors as a request by the Internal Affairs and Communications Ministry to increase local allocation tax grants.
Therefore, the Administrative Renewal Council and the Finance Ministry must be as stingy as possible when assessing whether the requests should be granted.
Pruning the budgetary requests will be difficult; securing the financial resources to implement them will be equally so.
Don't rely on bonds
Tax revenue of 46 trillion yen was initially forecast for this fiscal year, but the economic slump is likely to see this figure clipped by 5 trillion yen to 6 trillion yen. Some observers predict tax revenue could even dip below 40 trillion yen in the next fiscal year.
If these projections became reality, the government would be forced to depend on government bonds. This fiscal year, the issuance of national bonds was set at 33 trillion yen for the original budget. However, the approval of the supplementary budget saw the figure swell to 44 trillion yen.
It seems even more bonds will be issued next fiscal year. If tax revenue remains at 40 trillion yen and spending hits 95 trillion yen as stipulated in the ministries' initial requests, the issuance of national bonds likely will reach 45 trillion yen to 49 trillion yen, even with some nontax revenues likely to trickle into the state coffers.
Hatoyama earlier said the government would observe fiscal discipline and hold down the issuance of national bonds. However, under the present circumstances that will be easier said than done. Much of the blame for this can be directed at Hatoyama for putting off attempts to secure the necessary revenue sources.
If even more government bonds are issued, confidence in the bonds could erode and they might be sold heavily. As a result, interest rates would rise.
This will increase the government's interest payments, aggravating the already severe fiscal situation. Avoiding this unpleasant scenario will require the government to find revenue sources.
Try to find stable revenues
The new government's effort to suspend part of the supplementary budget for the current fiscal year eventually managed to squeeze out 2.9 trillion yen. The intention is to stop wasteful spending and instead use this money as revenue for the next fiscal year. This plan makes sense.
However, some government members are clamoring for a second supplementary budget centered on employment measures. A second supplementary budget would come with an expected price tag of 2.9 trillion yen.
This would be money that would become unavailable for the next fiscal year's budget. The Hatoyama Cabinet will be forced to find a new, alternative revenue source.
The Cabinet must try to secure stable financial sources not only for next fiscal year but also for the midterm and beyond.
First of all, we think the Cabinet should drop its election pledge to abolish the provisionally higher tax rates, such as that on gasoline. Going through with this plan would deprive central and local governments of 2.5 trillion yen a year in stable tax revenue. This is unreasonable.
The consumption tax is the surest financial source. To pay for ever-increasing social security costs, the government obviously has no other option but to raise the consumption tax rate. Doing so would allow the burden to be shared by the public.
The slumping economy means it would be risky for the government to raise the consumption tax rate immediately. But the matter should be discussed now so the rate will be raised as soon as the economy recovers.
The National Strategy Office, which is supposed to present basic policies for compiling budgets and for managing the nation's economic and fiscal policies, has yet to make its presence felt. National Strategy Minister Naoto Kan even said his office would not set new targets for restoring the nation's fiscal health--at least for now.
This stance, however, does not make sense. The lack of clear fiscal reconstruction policies in part allowed budgetary requests to swell.
The Aso Cabinet set a goal of reducing the ratio of outstanding debt held by the central and local governments against Japan's gross domestic product by the early 2020s.
The Hatoyama administration has a responsibility to show the public how it intends to reconstruct the nation's fiscal situation by, among other things, having the National Strategy Office show strong leadership in setting new reconstruction targets.
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