The government has canceled or suspended 21 public works projects that were progressing too slowly or dormant for too long, the internal affairs ministry said Friday.
The action followed an assessment in fiscal 2012 of 454 public projects that either failed to start within five years of being approved, or failed to finish within 10 years. The size of the initial budgets carved out for the canceled or frozen projects comes to a whopping ¥473.5 billion, with ¥388.3 billion of the money freed up by the move.
A breakdown of the canceled projects shows that 15 were designed by the infrastructure ministry and worth a total of ¥446.8 billion, four were launched by the health ministry at a cost of ¥14.5 billion, and two were planned by the agriculture ministry at a cost of ¥12.2 billion.
Japan is trying to limit annual policy spending for both fiscal 2014 and 2015 to about ¥70 trillion per year, the same amount budgeted for this year, as pressure mounts from other developed nations to craft a credible fiscal reform plan, Finance Ministry sources said.
In the meantime, the fiscal 2013 budget drafted by Prime Minister Shinzo Abe has thrown ¥5.28 trillion at public works spending as part of his “Abenomics” program, up 15.6 percent from last year.
Under a medium-term fiscal plan to be mapped out in August, Tokyo will promise to cover annual increases of nearly ¥1 trillion in social security costs by cutting other expenditures, the sources said. Japan’s fiscal health is the worst among the industrialized economies, and the recent rise in Japanese government bond yields is threatening to turn it into a crisis.
Abe’s government is counting on an increase in tax revenue from both an economic recovery and the planned doubling of the sales tax to 10 percent from 5 percent now. The first stage of the tax hike starts next year.
In a communique issued Tuesday in Northern Ireland, the Group of Eight leaders urged Japan to “address the challenge of defining a credible medium-term fiscal plan.”
Abe’s government will try to maintain the credibility of JGBs at home and abroad, but it is likely to face difficulty achieving the goals of the medium-term fiscal plan because it is unclear whether tax revenues will rise at the expected pace and whether spending can be reduced in the face of expected political resistance from the various ministries and agencies.
Japan expects to generate about ¥43.10 trillion in tax revenue in fiscal 2013.
In a longer-term economic and fiscal policy blueprint released last week, the Abe administration pledged to halve the ratio of the primary balance deficit to gross domestic product by fiscal 2015 from the 2010 level and bring it into surplus by fiscal 2020. A deficit in the balance means government spending cannot be financed without issuing new bonds.
Policy costs, including for social security, public works and other programs, totaled ¥70.37 trillion in the initial budget for 2013, which started in April.