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Monday, Sept. 6, 2010


Record budget request

Government ministries and agencies have submitted a record-high budget request of ¥96.75 trillion for fiscal 2011, topping by 1.8 percent the corresponding ¥95.04 trillion figure for fiscal 2010, which was also a record. Election pledges by the Democratic Party of Japan, automatic increases in social security costs, and debt-servicing costs have bloated the budget requests.

The government will have difficulty trimming these requests as it drafts the fiscal 2011 budget. The initial fiscal 2010 budget was slashed to ¥92.3 trillion, and still amounted to a record. If former DPJ Secretary General Ichiro Ozawa beats Prime Minister Naoto Kan in the party's presidential election and becomes prime minister, there will be more pressure to expand the budget because he appears to favor big spending.

The Kan Cabinet imposed a fixed 10 percent cut in policy-related spending across all ministries in order to earmark slightly more than ¥1 trillion as a "special fund to restore vitality to Japan." Money in this fund is intended for areas believed to contribute to economic growth. Budget requests calling for use of this money totaled ¥2.94 trillion. It is regrettable that some of these requests have nothing to do with the purposes of the special fund.

For example, the Defense Ministry has requested ¥475.5 billion from the fund, including ¥185.9 billion to shoulder part of the United States' cost to station its military forces in Japan. The infrastructure and transport ministry requested money for projects that the ministry had earlier considered unnecessary. The farm ministry requested money for land improvement projects from the special fund.

The government plans to issue bonds worth ¥44.3 trillion — about the same as in fiscal 2010 — and expects tax and nontax revenues to reach ¥43.7 trillion. This means that the total budget request exceeds the amount expected from bonds and revenues (¥88 trillion) by some ¥8.7 trillion. It is clear that the government must carry out vigorous prioritization of the budget, which will necessitate drastic cuts in some spending.

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