Prime Minister Shinzo Abe expressed his eagerness Monday to push for a law stipulating how to achieve fiscal reconstruction, amid concern over Japan’s massive bond sales to fund stimulus steps centering on large-scale public works projects.
“We’ll consider whether to establish legislation” that would specify a road map and method to restore the country’s fiscal health, Abe told the House of Representatives plenary session.
Japan’s fiscal situation is already the worst among major developed economies.
It is the first time Abe has mentioned the possibility of introducing legislation toward fiscal rehabilitation since he assumed office in December.
“We have to accelerate efforts to reform revenues and expenses in order to ensure sustainable fiscal reconstruction for an extended period,” Abe said.
“We’ll map out a concrete path to simultaneously attain Japan’s economic revitalization” and fiscal rehabilitation at the Council on Economic and Fiscal Policy, the government’s key economic panel, he added.
Abe’s government has pledged internationally to halve the ratio of the primary balance deficit to the nation’s gross domestic product by fiscal 2015 from the level in fiscal 2010. The deficit in the primary balance means the country cannot finance government spending without issuing new bonds.
But the latest estimate released by the Cabinet Office showed Japan could log a deficit of ¥33.9 trillion, or 6.9 percent of nominal GDP, in fiscal 2013 starting in April due to additional debt issuances for fiscal 2012, worse than the ¥25.4 trillion, or 5.2 percent, calculated last August, suggesting the goal is almost infeasible.
The Diet last month enacted a ¥13.1 trillion supplementary budget, the second-largest of its kind, to fund an economic stimulus package, bringing the country’s budgetary spending for fiscal 2012 to around ¥103 trillion, despite ballooning debt.
To cover the shortfall in revenue needed to pay for the extra budget, Abe’s government decided to sell an additional ¥7.8 trillion in bonds, bringing the total amount of debt for the fiscal year through March to ¥52 trillion, the Finance Ministry said.
Abe’s administration has pledged to hammer out concrete measures to realize fiscal reconstruction in August or September.