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来年度予算 公約優先では財政がもたない

The Yomiuri Shimbun (Dec. 26, 2009)
DPJ must find funds for its election pledges
来年度予算 公約優先では財政がもたない(12月26日付・読売社説)

The shift in power brought about by the last general election has caused a sea change in the process of putting together a government budget. However, the budget for the next fiscal year devised by the Democratic Party of Japan-led administration indicates that the government is unchanged in relying on the issuance of government bonds and nontax revenue for resources to underwrite its budget.
In fact, the next budget shows the government has become even more dependent on borrowing as a means of securing budgetary resources.

On Friday, the Cabinet of Prime Minister Yukio Hatoyama finalized the budget for fiscal 2010. Its general account expenditures total 92.3 trillion yen, an all-time high for an initial fiscal budget.

The budget entails 53.5 trillion yen in spending for specific government policies, greater than the amount of expenditures in this category under the fiscal 2009 budget. Debt-servicing costs--expenditures needed to redeem government bonds and pay interest on such bonds--total 20.6 trillion yen, and local tax grants for discretionary purposes 17.5 trillion yen.


Only 37.4 tril. yen from taxes

Meanwhile, the next fiscal budget has set annual government revenue from taxes at 37.4 trillion yen, which nearly compares with that to be expected under the fiscal 2009 budget in the wake of a second supplementary budget. Tax revenue has fallen to about the same level as was registered 26 years ago.

The government hopes to make up for a projected revenue shortfall using nontax revenue totaling 10.6 trillion yen--known as "buried treasure"--and government bond-generated revenue worth 44.3 trillion yen. The money includes funds deposited in the special account for government loan and investment programs, as well as surplus funds from the foreign exchange special account.

Government bond issuance accounts for 48 percent of total revenue under the fiscal 2010 budget, meaning almost half of revenue is expected to come from debts.

The current economic situation is so precarious it must be rectified by an underpinning fiscal stimulus. Given this, issuing new government bonds will be unavoidable. It is easy to see, however, that the government's chronic reliance on debt cannot be left unaddressed any longer if one stops to look at the government's fiscal crisis from a medium- and long-term standpoint.

The greatest factor behind the difficulties in devising the next budget was the Hatoyama Cabinet's obsessive adherence to its goal of carrying out policies spelled out in the DPJ's election manifesto. The confusion embroiling the government in this respect started immediately after the new Cabinet was launched. The Hatoyama administration scrapped the guidelines for budgetary appropriation requests set by its predecessor, the coalition government of the Liberal Democratic Party and New Komeito, and also ordered each government ministry and agency to submit new budgetary demands.


2 miscalculations

Total budget requests came to 95 trillion yen, up 6.5 trillion yen from the 2009 initial budget. This increase was the result of the inclusion of policies contained in the DPJ manifesto, such as child-rearing allowances, making public high school eduction virtually free and a plan to eliminate some expressway tolls.

In the course of discussing how to fund these pledges in the budget, the Hatoyama administration noticed it had made two glaring miscalculations: a major drop in tax revenue, and its pruning of budget requests fell well short of expectations.

The economic downturn has caused tax revenue for fiscal 2009 to plunge more than 9 trillion yen below initial forecasts, with the fall in corporate tax especially severe. Tax revenue is also expected to stay flat for fiscal 2010.

The DPJ assumed it could secure additional revenue by cutting wasteful programs. However, its attempts to eliminate budget fat finished with disappointing results.

The DPJ had insisted 10 trillion yen to 20 trillion yen could be freed up by reviewing both the general and special accounts. In its manifesto, the party stipulated it would wring out nearly 17 trillion yen annually four years after taking power.

The budget screening to cut wasteful spending started with great fanfare. However, the screening panel could not find wasteful programs to the extent that the DPJ first assumed. The administration initially set a target of 3 trillion yen in cuts, but could only come up with about 1 trillion yen.

Despite this, the Hatoyama administration insists revenue sources are still waiting to be uncovered. The administration bears a heavy responsibility for these actions.

Despite this chronic revenue shortage, Hatoyama refused to budge from his plans to implement policies spelled out in the DPJ manifesto. This greatly delayed the compilation of fiscal 2010 tax reform plans.

Hatoyama eventually accepted DPJ requests submitted by Ichiro Ozawa, the party's secretary general, and modified several manifesto pledges, such as virtually retracting a proposal to abolish the provisionally higher gasoline tax. In the end, the budget was compiled within this year, although it was anything but smooth sailing.

Worryingly, huge sums have been allocated to policies apparently designed to impress voters ahead of next year's House of Councillors election, such as an income compensation plan for individual farmers.

Also disconcerting is the slashing of public works-related budgets by 1.3 trillion yen to 5.8 trillion yen, an 18 percent reduction from the initial budget for this fiscal year.


Fiscal rehabilitation urgent

We are concerned by figures in the approved draft budget for fiscal 2010. The long-term debt of the central and local governments is forecast to reach about 862 trillion yen by the end of the next fiscal year, a figure about 1.8 times larger than the nation's gross domestic product. Japan's figure is easily the highest among the United States and major European nations.

There is more than 1,400 trillion yen in household financial assets in Japan. Some observers say that the long-term debt is not so problematic because government bonds could be sold to domestic buyers who own these assets.

But if housing loans and some other debts are excluded, only about 1,000 trillion yen remains. Given the fact that the gap between long-term debt and household assets has been narrowing year by year, the government must seriously consider how to secure stable tax revenues.

The Hatoyama Cabinet intends not to raise the consumption tax rate--the most promising revenue source--until the next House of Representatives election a few years from now. But it is clear that a budget cannot be compiled given the current revenue shortage.

Even if raising the consumption tax is considered a change in policy, the public likely will go along with it provided the administration earnestly explains that the rate hike is necessary for securing revenue for social security measures.

The Hatoyama Cabinet should start preparations so discussions for raising the consumption tax rate can start after the upper house election next summer, and so the measure could be implemented as soon as the economy gets on a solid recovery track.

(From The Yomiuri Shimbun, Dec. 26, 2009)
(2009年12月26日01時18分 読売新聞)

by kiyoshimat | 2009-12-26 09:01 | 英字新聞

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