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Thursday, July 29, 2010
Limiting budget requests
The government has adopted guidelines for fiscal 2011 budget requests. Government spending and bond issuance will be at the same levels as in fiscal 2010. For the sake of long-term financial reconstruction, Cabinet ministers must refrain from bloating their budget requests. Since money will be tight, the administration must show ingenuity in determining how the money will be used.
In fiscal 2011, general-account spending, excluding debt servicing cost, will be limited to ¥71 trillion and bond issuance to ¥44 trillion — both at the same levels as in the fiscal 2010 budget, which is the largest budget ever.
In principle, a 10 percent reduction will be imposed on budget requests for policy-related spending. This cut will not be applied to budget requests for social welfare spending, grants from the central government to local governments and the continuation of the already-implemented spending to carry out policies included in the Democratic Party of Japan's manifesto for the 2009 Lower House election, such as the child allowance.
This means that a 10 percent reduction will be imposed on some ¥24 trillion and that up to ¥2.4 trillion will be saved. The saved amount will be used to pay for an increase in social welfare spending and a special fund of more than ¥1 trillion the DPJ asked for. Social welfare spending is expected to see an automatic increase of some ¥1.3 trillion because of the graying of the population. Money in the special fund will be used for such purposes as investment in areas where economic growth is expected as well as the development of employment opportunities and human resources.
In deciding how to use the special fund money, the administration plans to conduct a "policy contest" by listening to outside opinions in a public forum. The prime minister will make the final decision.
The DPJ may apply pressure to secure more spending to fully implement its campaign promises. Prime Minister Naoto Kan must resist such a move. But his administration must do its utmost to best allocate the limited funds to ensure economic recovery and to help stabilize people's lives.