Finance Minister Kiichi Miyazawa on Monday proposed a draft general-account budget for fiscal 2000 worth 84.99 trillion yen intended as the “final push” for economic recovery.
The budget, featuring massive public works spending and expanded funds to handle bank failures, is the largest-ever and 3.8 percent more than the initial fiscal 1999 figure of 81.86 trillion yen.
The draft was approved by the day’s Cabinet meeting.
It will mark the second consecutive year of expansionary budgets since the belt-tightening Fiscal Structural Reform Law was frozen last December, just one year after its enactment.
The budget will push the nation deeper into debt, requiring the government to issue a record 32.61 trillion yen in new bonds, 1.56 trillion yen more than the initial figure for fiscal 1999.
As a result, the government debt is expected to account for 38.4 percent of next year’s budget, topping the 37.9 percent initially estimated for this year.
The Finance Ministry expects the outstanding long-term debts of the central and local governments combined — already at one of the worst levels in the industrialized world — to rise to 647 trillion yen, a scale equivalent to 130 percent of the nation’s gross domestic product, at the end of fiscal 2000.
The ministry meanwhile estimates tax revenues to increase by 3.3 percent to 48.66 trillion yen.
Miyazawa also proposed a draft budget for a 42.99 trillion yen “zaito” fiscal investment and loan program — known as the second state budget — for fiscal 2000, down 18.7 percent from the current year.
The Cabinet is scheduled to finalize the budgets Friday after ministries and agencies complete a final round of negotiations with the Finance Ministry in an effort to revive their original requests. In the general account, 50 billion yen has been set aside for possible allocation during the negotiations.
Subject to Diet approval early next year, the budgets will take effect in April.
“I hope this will be the last budget (that is this expansionary),” Miyazawa said in a news conference, expressing his desire for private demand to recover next year. The budget contains “everything necessary” to put the economy on a recovery track and stabilize the financial system once and for all, as he had said earlier.
He also said he realizes the need for fiscal structural reform to reduce the massive government debt but added this is not the right time.
The general expenditure portion of the budget — computed by deducting national bond expenses and tax grants allocated to local governments from overall general-account outlays — will total a record 48.09 trillion yen, 2.6 percent higher than the initial fiscal 1999 budget.
That portion, which finances various policy programs, accounts for 57 percent of the general account. Its share has been shrinking as the debt servicing for interest payments and bond redemption occupies a growing share.
The debt servicing in the latest draft includes 4.5 trillion yen in bond-redemption funds to handle bank failures and protect depositors. Miyazawa said he hopes spending for this purpose will be no longer needed after fiscal 2000.
The total figure of 84.99 trillion yen may rise during the fiscal year through supplementary budgets, as has been the case in recent years.
In the general expenditures, public works projects come to 9.93 trillion yen, the same as in the initial fiscal 1999 budget, which had marked an 11 percent rise from the previous year.
Of the 9.93 trillion yen, 500 billion yen has been reserved for unspecified public projects, also like this year. This special reserve fund may be used to ensure economic recovery, the ministry said.
Official development assistance outlays total 1.04 trillion yen, a 0.5 percent fall from the previous year. But the dollar-based figure will be much higher because of the yen’s recent appreciation, ministry officials said.
In ODA spending, the ministry set aside 248.1 billion yen for bilateral grants, down 0.6 percent from the initial budget this year on a yen basis.
Of that, economic assistance is up 2.6 percent to 204.9 billion yen, and assistance for food and other purposes is down 13.1 percent to 43.2 billion yen.
Defense spending comes to 4.94 trillion yen, edging up 0.1 percent from the previous year.
On a contract basis, 29.4 billion yen was newly earmarked for countermeasures against suspicious foreign boats intruding into Japan’s territorial waters. Last March, Japanese authorities failed to intercept two apparent North Korean spy vessels.
The budget for the research project with the United States on a theater missile defense system will be increased from 960 million yen in fiscal 1999 to 2 billion yen.
As for host-nation support for the U.S. bases in Japan, contracts for facilities improvement will be cut 5.4 percent from the previous year to 80.9 billion yen. This is lower than the original U.S. request of 83.4 trillion yen. It will be the first time since host-nation support began in 1978 that the ministry will not approve the full requested amount.
In the social security arena, some 1.3 trillion yen will be spent to help finance the public nursing-care insurance system, which starts in April.
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