The government on Wednesday submitted an 82.65 trillion yen budget for fiscal 2001 to the Diet that features a record 48.66 trillion yen outlay meant to bolster the teetering economy.

The budget is designed to help Japan attain its economic growth target of 1.7 percent for fiscal 2001.

The 48.66 trillion yen outlay, known as general expenditures, for the 12-month period starting April 1 is up 1.2 percent from the initial general-expenditure budget for fiscal 2000.

The outlay marks the third consecutive year of growth in planned spending on public works, social security and other policy programs.

The general-expenditure allocation is the largest component in the general-account budget and covers all policy spending -- from defense to education -- for fiscal 2001.

The general-account budget of 82.65 trillion yen was down 2.7 percent from the initial size of the fiscal 2000 budget, the first fall in six years.

The budget calls for 9.44 trillion yen in public works spending, up 1.2 trillion yen over the current fiscal year.

It also calls for trimming the amount of new bond issues by 13.2 percent, or 4.29 trillion yen, to 28.32 trillion yen in net terms, down for the first time in three years.

The Finance Ministry traced the net borrowing cut to the failure to set aside funds to redeem 4.5 trillion yen in the special bonds that the ministry had given in fiscal 2000 to the state-run Deposit Insurance Corp. to stabilize the banking system, which is swamped in bad loans.

Despite the cut in net borrowing, the ratio of bond issues to the total general-account budget will remain high at 34.3 percent, although the ratio is down from 38.4 percent for fiscal 2000.

The massive government spending plan will boost the combined balance of long-term debt of the central and local governments to 666 trillion yen as of the end of March 2002, up 24 trillion yen from the March 31 end of the current fiscal year.

Drafters of the budget expect total revenues in fiscal 2001 to reach 54.33 trillion yen, including 50.73 trillion yen in tax and stamp revenues.

It will be the first time in three years for the estimated revenue in an initial budget to top 50 trillion yen.

They traced the prospective upturn mainly to higher corporate tax revenues expected to spring from companies' improved profitability.

Debt-servicing costs for fiscal 2001 are projected at 17.17 trillion yen, down 21.8 percent, whereas subsidies to local governments in the form of tax grants will be raised 12.7 percent to 16.82 trillion yen.

Dual goals boasted

The government will pursue the dual goals of achieving a self-sustaining economic recovery and beginning preparations for fiscal reform, Finance Minister Kiichi Miyazawa said Wednesday in a policy speech to the Diet.

To this end, Miyazawa called on the Diet to quickly deliver and pass the government's fiscal 2001 budget, which is worth 82.65 trillion yen.

"For the nation to achieve stable development in this 21st century, it is important to place the economy on a self-sustaining recovery path," Miyazawa said. "But at the same time, we are urged to start social and economic structural reforms as well."

Explaining the current state of the economy, Miyazawa told the Diet that the gradual recovery is still being led by the corporate sector, although employment and private consumption remain stagnant.

"The government needs to do its utmost to achieve a smooth transition from a recovery led by public demand to one led by private demand," Miyazawa said.

As to public works spending under the proposed budget, which includes 9.44 trillion yen plus a 300 billion yen reserve fund for unspecified projects, Miyazawa claimed these allocations are all for ensuring the transition.

On tax reform, Miyazawa underlined government efforts to review corporate taxes in line with the changing business environment and continue housing loan cuts to accelerate a private demand-led recovery.

Miyazawa meanwhile acknowledged the need for the government to launch full-scale fiscal reforms, saying long-term liabilities of the central and local governments are expected to reach 666 trillion yen by March 2002.

The government will begin discussions on fiscal reform at the Council on Economic and Fiscal Policy, a new panel headed by Prime Minister Yoshiro Mori, because the issue involves various areas ranging from taxes to social security and relations between the central and local governments, Miyazawa said.