The Noda administration on Aug. 17 adopted guidelines for budgetary requests for fiscal 2013, with a funding priority for three areas — the environment, medical services, and agriculture and fisheries. These areas are the main pillars of the government’s Japan revitalization strategy.
The government needs to pursue two difficult goals: strengthening these three areas as seeds for stimulating the economy while maintaining overall financial discipline.
Under the guidelines, the government will maintain the current fiscal year’s ¥71 trillion cap on major policy spending and ¥44 trillion limit on the issuance of new deficit-covering bonds.
Since Prime Minister Yoshihiko Noda told the top leaders of the Liberal Democratic Party and Komeito that he will dissolve the Lower House in the near future, the perception is likely to spread that the standing of the Noda administration is weak.
In such a situation, pressure from various groups to increase government spending for various projects is likely to increase. It is all the more important for the government to resist such pressure and maintain financial discipline.
The guidelines have introduced devices designed to provide more funds for projects that will play important roles in the Japan revitalization strategy. If ministries and agencies reduce budgetary requests for other projects, they will be allowed to request funds for environment-related projects, including development of renewable energy sources, up to four times the reduced amounts.
For projects related to medical services and agriculture and fisheries, they will be allowed to ask for funds up to two times the amounts reduced for other projects. For other projects included in the Japan revitalization strategy, they can ask funds up to 1.5 times the amounts reduced for other projects.
The government must scrutinize budgetary requests in order to prevent ministries and agencies from asking for funds for mutually similar projects. Given the government’s financial difficulties, it is important to avoid duplication of similar projects.
It is clear that the government alone cannot carry out economic development. It must take care so that government projects are such as to stimulate investment by the private sector.
Social welfare spending for fiscal 2013 will automatically increase by ¥840 billion. Utmost efforts must be made to prevent waste in social welfare spending. Careful discussions are needed concerning moves to reduce livelihood protection benefits, the last resort in the nation’s social safety net.
The government must stop any move to spread money around for public works projects in the name of pushing reconstruction of the areas hit by the 3/11 disasters, although adequate funds should be provided for projects designed to reduce damage from large-scale natural disasters and to improve the lives of people in disaster-hit areas.