For the fifth straight year, the government will probably be forced to issue the deficit-covering bonds that have helped drive the nation into fiscal crisis, a senior Finance Ministry official indicated August 28.
According to an estimate by the ministry released the same day, requests for the fiscal 1998 general account budget compiled by individual government ministries and agencies will total roughly 80.55 trillion yen, up 4.1 percent from the budget of the current fiscal year.
The fiscal 1998 state budget will be the first step in the government’s efforts at fiscal reconsolidation. The reform would involve reducing the combined fiscal deficit of the central and local governments to 3 percent of gross domestic product or less and stopping the issuance of deficit-covering bonds by fiscal 2003.
A total of 16.7 trillion yen worth of government bonds was issued to help finance the fiscal 1997 budget. Of this amount, 7.47 trillion yen was in the form of deficit-covering bonds. In theory, the government must reduce the issue of deficit-covering bonds by 1.25 trillion yen every year up to 2003 to meet its goal.
Meanwhile, requests for the Fiscal Investment and Loan Program, or “zaito,” the nation’s so-called second budget, were estimated at 37.45 trillion yen, 5 percent less than the program for fiscal 1997. The budget requests are to be formally submitted to the Finance Ministry by the end of this month, with a final budget draft to be drawn up by the end of the year.
General expenditure requests — the policy-related portion of the budget — were expected to come to 43.57 trillion yen, a decrease of 0.5 percent from the initial budget for this fiscal year. Through fiscal 1997, one portion of the revenue from past sales of Nippon Telegraph and Telephone shares was not counted as part of general expenditures, although the money was used to help fund some public works projects. But from fiscal 1997, it will be included in general expenditures.
With the inclusion of this amount, the general expenditure request bracket came to 44.79 trillion yen, compared to the 45.11 trillion yen in the fiscal 1997 budget. But while outlays for policy implementation were shaved in line with austere budget request caps set by Prime Minister Ryutaro Hashimoto in July, debt-servicing costs were predicted to rise to 18.06 trillion yen, a growth of 7.5 percent from the current fiscal year’s budget.