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Impact of bigger public works budget unclear

by Reiji Yoshida

Staff Writer

Prime Minister Shinzo Abe’s fiscal 2014 draft budget has sparked debate over whether he has significantly increased the public works budget in a major policy shift from his predecessor administrations led by the Democratic Party of Japan.

Under the fiscal 2014 draft budget adopted Tuesday by the Cabinet, funding for roads, railways, bridges and other social infrastructure will surge 12.9 percent from this year to ¥5.97 trillion despite the snowballing national debt that already exceeds 200 percent of gross domestic product.

But much of the increase can be attributed to the melding of a special public works account with the general account, and public works spending will really increase only 1.9 percent, according to the Finance Ministry.

Still, that 1.9 percent increase will be the largest since 1999, when the public works budget ballooned 5 percent.

Finance Ministry officials declined to say whether it will represent an increase in real terms, as the consumption tax will rise to 8 percent in April and prices of construction materials and labor costs have soared in the wake of the 2011 quake-tsunami disaster in the Tohoku region.

“You can’t exactly estimate the impact of the consumption tax hike yet,” a senior Finance Ministry official said. “We have made our utmost effort to curb the public works budget.”

Administrations since the 2000s, in particular those led by the DPJ, have kept spending on public works down as many of the projects were criticized as massive pork for rural politicians and vested interests.

Abe has advocated aggressive government spending to pull the country out of long-running deflation, and whether he will increase public works budgets in the general account had been a focus of public attention.

With the fiscal 2014 budget draft, the administration plans to boost spending to repair aging roads by 6.7 percent to ¥268.4 billion, and increase funding for bullet trains by 2 percent to ¥72 billion.

Abe’s Liberal Democratic Party came back to power last December. Many of its most powerful lawmakers represent rural areas.