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Japan's cabinet approves draft budget
(Agencies)
Updated: 2004-12-20 20:53
Japan's Cabinet on Monday endorsed a draft 82.18 trillion yen ($788.7
billion) national budget for fiscal 2005, increasing overall spending to care
for an aging population and to pay interest on government debt.
The plan trims defense and education spending, however, in an attempt to
control deficit spending.
The Finance Ministry draft, which now goes back to ministries for review
before a final Cabinet vote on Friday, also calls for a cut in new bond issuance
to ease the country's snowballing national debt. The document is to be presented
to Parliament in January.
The proposal, for the year starting April 1, charts a 0.1 percent increase in
total spending, but cuts 0.7 percent from general account expenditures, which
encompasses discretionary spending outside of debt servicing and other
compulsory costs.
While departments from education and defense to public works and overseas aid
face cuts, the social security allocation rose 2.9 percent, underscoring rising
costs of supporting Japan's rapidly aging population.
Spending on social security, at 20.37 trillion yen ($195 billion), is by far
the biggest single part of the national budget. It is followed by interest on
the national debt, which will cost 5.0 percent more next year because of a rise
in outstanding bond issues.
Defense spending will be cut for the third year in a row, this time by 1.0
percent to 4.86 trillion yen ($46.6 billion). The spending cuts come despite
Japan's shift toward a more active international military stance.
Restraining non-social security spending should enable the government to trim
the issuance of new government bonds to 34.39 trillion yen ($330 billion), down
2.2 trillion yen ($21.1 billion) from this fiscal year, officials said.
"We have maintained and strengthened our position to reform government
spending," Finance Minister Sadakazu Tanigaki said in outlining the draft
budget. "We were able to curb spending while shifting funds to key areas to
compile an efficient budget."
Prime Minister Junichiro Koizumi said he was satisfied with the outcome.
"The budget draft turned out to be a good one," he said. "It generally
follows our (reform) policy, although it still has to be fine-tuned."
Japan's deficit will stand at 15.95 trillion yen ($153.1 billion) in fiscal
2005, down 3.1 trillion yen ($29.7 billion) from the current fiscal year for the
second straight year of improvement.
But this is still far from the government's goal of achieving a surplus — by
which tax revenues exceed expenditures minus debt-servicing costs — in the early
2010s.
Japan's outstanding long-term debt will also rise to 1.51 times gross
domestic product by March 2006, breaking Tokyo's own record for the highest debt
burden in the industrialized world. The previous high, from this year, was 1.46
times GDP.
In an apparent effort to find new buyers for Japanese government debt,
Finance Ministry officials will travel to London and New York next month.
Currently, only 3 percent of outstanding Japanese government bonds are held by
foreign investors, low by international standards.
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