Prime Minister Keizo Obuchi’s Cabinet on Monday approved a draft 81.86 trillion yen general account budget for fiscal 1999 that calls for an 11 percent rise in public works spending.
The draft is the largest ever and is 5.4 percent larger than the initial fiscal 1998 figure of 77.67 trillion yen. It also puts the nation deeper into debt.
The expansionary draft was compiled in light of a huge package of tax cuts — including 6.3 trillion yen in individual and corporate income tax reductions — that could further harm the nation’s fiscal health. Combined with the deepening recession, the tax cuts will reduce tax revenues by 20 percent from fiscal 1998’s initial estimate to 47.12 trillion yen, according to the Finance Ministry.
The dwindling revenues and larger spending will force the government to issue a record 31.05 trillion yen in new bonds, nearly double fiscal 1998’s initial figure.
As a result, government bonds will account for 37.9 percent of state spending in fiscal 1999, close to the upward revised figure of a record 38.6 percent in this fiscal year. That will bring outstanding government bonds in the general account to some 327 trillion yen, or 66 percent of GDP, by the end of fiscal 1999.
The ministry expects the fiscal deficits of the central and local governments combined — already at one of the worst levels in the industrialized world — to account for 9.2 percent of GDP by that time.
The Cabinet also approved a draft budget for a 52.78 trillion yen “zaito” fiscal investment and loan program for fiscal 1999, up 5.7 percent from the current year, designed to ease firms’ fundraising difficulties and streamline public corporations.
The Cabinet is scheduled to adopt the general account budget Friday after ministries and agencies complete a final round of negotiations with the Finance Ministry in an effort to revive their original requests. An additional 50 billion yen has been set aside for possible allocation during the negotiations.
A year ago, the budget was compiled under the belt-tightening Fiscal Structural Reform Law, and the total amount edged up only 0.4 percent from the previous year. The austerity law was frozen earlier this month to allow aggressive spending.
“We are going to use up all the fiscal resources available,” Finance Minister Kiichi Miyazawa told a news conference. “It is like putting Great Genie (of the Yokohama BayStars) on the mound from the first inning,” he said, referring to the MVP relief pitcher Kazuhiro Sasaki.
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