The Liberal Democratic Party is primed to compile a large-scale supplementary budget for fiscal 2012 to rev up the economy after its landslide victory in Sunday’s Lower House election.
For the regular budget for fiscal 2013 starting next April, the LDP plans massive public works spending, including outlays for measures to minimize the impact of natural disasters following the March 2011 quake and tsunami that hit the Tohoku region.
LDP leader Shinzo Abe said Sunday the supplementary budget will be large, noting compilation of the fiscal 2013 budget is expected to be delayed.
LDP ally New Komeito is also positive on drawing up a large-scale extra budget for the current fiscal year, calling for spending worth about ¥10 trillion.
The LDP plans to again form a coalition government with New Komeito, which also fared well in the election, to retake power for the first time in three years and three months.
But the active spending proposed would involve additional issuance of Japanese government bonds. A senior Finance Ministry official cautioned that a policy like that would undermine Japan’s fiscal discipline.
The Democratic Party of Japan-led government set its bond cap for fiscal 2012 at some ¥44 trillion, excluding refinancing bonds.
The limit has already been reached. In this regard, however, New Komeito chief Natsuo Yamaguchi recently signaled he would tolerate letting fiscal 2012 bond issuance break the ceiling to eke out resources for the supplementary budget.
Meanwhile, LDP Secretary General Shigeru Ishiba said Sunday the party will undertake the fiscal 2013 budget compilation process, which has been led by the DPJ, after the change of government, starting with seeking budget requests from government agencies, he said.
As the national debt is seen topping ¥1 quadrillion by the end of March, the LDP will certainly be urged to ensure careful fiscal management, analysts said.
On monetary policy, the LDP plans to “call on” the Bank of Japan to take bold easing measures. The BOJ has been aiming to achieve 1 percent year-on-year growth in the core consumer price index, but the LDP stresses the need to set a target of at least 2 percent.