The administration aims to limit new debt issuance for the next fiscal year below tax revenue, Finance Minister Taro Aso said, underscoring the intention to maintain resolve for rehabilitating the country’s ailing public finances.
Aso, also deputy prime minister, is in charge of drafting an initial budget for fiscal 2013. The Cabinet of Prime Minister Shinzo Abe is planning to approve the draft budget next Tuesday and submit it to the Diet, whose ordinary session opens Monday.
“I want tax revenue to be bigger than the amount of new bond issuance,” Aso said. If the administration can pull it off, it would be the first time in four years.
He said the government wants to cap new debt at ¥44 trillion, the same level as pursued by the previous administration led by the Democratic Party of Japan.
For fiscal 2012, which will draw to an end March 31, the DPJ-led government had decided to borrow ¥44.2 trillion while estimating tax revenue at ¥42.3 trillion.
The Finance Ministry is seeking to set both at ¥43 trillion to ¥43.9 trillion for the next fiscal year, ministry officials said.
“We are making efforts to that end,” Aso said, but added “it is not so easy.”
Abe’s Cabinet last week OK’d a draft ¥13.1 trillion extra budget for the current fiscal year, the second-biggest on record for a supplementary budget, to fund a stimulus package for the economy struggling under chronic deflation.
The move was received positively by financial markets and Tokyo stocks shot up.
But it also triggered fears among market participants that the new Liberal Democratic Party government may weaken the nation’s fiscal discipline despite outstanding public debt snowballing due to burgeoning welfare costs resulting from the aging population.
Deutsche Bundesbank President Jens Weidmann on Monday severely criticized Prime Minister Shinzo Abe’s monetary and economic policy, which has come to be called “Abenomics.”
In Hungary and Japan, new governments are intervening heavily in central bank affairs, pressing for more aggressive monetary policy and threatening central bank independence, said Weidmann, who also sits on the European Central Bank’s Governing Council.
One consequence of heavy interference with central bank affairs could be the politicization of foreign exchange rates, he said. So far, the international monetary system has come through the financial crisis without competitive devaluations, he added, expressing hope that the situation will remain the same.