Despite dissent within the ranks of his Democratic Party of Japan and Cabinet, Prime Minister Naoto Kan’s administration endorsed on Tuesday a 10 percent cut on all ministries’ fiscal 2011 budget requests and earmark at least ¥1 trillion to stimulate economic growth.
The approved guideline, which ministries will use when they compile their budget requests, caps annual policy-related spending at ¥71 trillion, as previously pledged by Kan. The Cabinet also agreed to hold open debate on which projects deserve a share of the ¥1 trillion.
The challenge for Kan is to curb government spending while also providing sufficient stimulus for the weak economy. The fiscal hawk has said corralling the soaring public debt is inevitable to avoid a financial crisis similar to what Greece has been going through.
But Chief Cabinet Secretary Yoshito Sengoku acknowledged that agreeing on terms for the 2011 budget wasn’t easy and some ministers want the guideline modified.
“Some opined that the draft should state clearly how the DPJ’s political pledges are reflected in the budget plan,” Sengoku told reporters after the outline was pitched to the Cabinet.
Others insisted the government first focus on cutting wasteful spending and use the fat as a budget resource, he said.
Kan called on Cabinet members to “demonstrate their leadership” in cutting wasteful spending in their ministries.
“This is an extremely important budget that will revitalize a vigorous Japan,” Kan told a special Cabinet meeting in the afternoon, according to Sengoku.
The across-the-board 10 percent budget cut drew flak until the last minute, especially from ministries that claim there was no fat left to carve after last year’s budget-making process.
“We would like to have all the spending that we cut last year recognized,” agriculture minister Masahiko Yamada said.
Land minister Seiji Maehara voiced discontent over the plan, insisting his ministry has already pushed for substantial cuts in public construction projects.
Kan also clashed with the DPJ policy research council, which initially requested that ¥2 trillion be set aside for stimulus purposes to kick-start the economy.
With the Finance Ministry reportedly opposing the ¥2 trillion demand from the DPJ, the Cabinet agreed on ¥1 trillion as a compromise. Sengoku said Monday the ¥2 trillion figure from the party “is a suggestion and not an official request,” illustrating friction between the DPJ and the government. “We are working to not exceed ¥44 trillion in new debt issuance.”
Kan is expected to face a tough extraordinary Diet session that kicks off Friday, in the wake of the DPJ-led ruling bloc’s loss of its majority in the July 11 Upper House election. The coalition is certain to face resistance getting bills passed, including the budget plan.
Approving the budget guideline was an attempt by the DPJ to demonstrate it is calling the shots, not bureaucrats, as Kan will have final say over the distribution of the special ¥1 trillion, Sengoku said.