Japan budget requests likely to top ¥100 trillion for second year in fiscal 2014

Kyodo

Fiscal 2014 initial budget requests from all ministries and agencies are expected to exceed ¥100 trillion for the second straight year, sources said Tuesday.

The requests, covering both general-account spending and expenditures for reconstruction from the March 2011 earthquake and tsunami, are set to swell as expenses related to economic measures and social security are expected to grow. Initial budget requests for fiscal 2013 totaled a record ¥102.5 trillion.

Earlier this month, Prime Minister Shinzo Abe’s government approved guidelines for the compilation of the budget for the next fiscal year, which starts in April, and a medium-term fiscal reform plan, in which it pledged to narrow the budget deficit by ¥17 trillion over the next two years.

The budget requests, however, underscore that it will be difficult for Abe to restore Japan’s fiscal health, which is the worst among major developed economies, with the public debt equivalent to over 200 percent of gross domestic product.

The Finance Ministry has asked ministries and agencies to submit their requests by Friday.

The government decided not to put a ceiling on budgetary requests for the initial fiscal 2014 budget, as tax revenues cannot be projected with a decision yet to be made on whether to proceed with the planned sales tax hike to 8 percent from 5 percent next April.

Total general spending requests, including for social security, national defense, industrial development and public works projects, is expected to reach about ¥99 trillion, the sources said.

The Ministry of Land, Infrastructure, Transport and Tourism has requested ¥5.9 trillion, as Abe, who has been trying to end nearly two decades of deflation by boosting domestic demand, has promised to make infrastructure more resilient to disasters.

The Ministry of Economy, Trade and Industry has requested ¥1.7 trillion, aiming to shore up private-sector investment, a pillar of the government’s economic growth strategy — one of the “three arrows” of Abe’s economic policies, dubbed “Abenomics.”

The Finance Ministry said interest payments and other debt-servicing costs, which the budget presumably will have to cover, in the next fiscal year are expected to expand to a record ¥25.3 trillion.

The government normally drafts a state budget in December for the next fiscal year starting in April.