Business

FISCAL 2005 BUDGET

Cabinet OKs 48.2 trillion yen outlay cap

The Cabinet on Friday approved a 48.2 trillion yen ceiling for core policy-related outlays in the fiscal 2005 budget, kicking off the annual scramble by government ministries and agencies for public funding.

“We wait, pitch our project, try to find out how much we can safely ask for and come again next week,” said an Ministry of Economy, Trade and Industry bureaucrat, who stood fanning himself during an hourlong wait in a Finance Ministry hallway.

All ministries must make their final requests by the end of August. And then negotiating begins, because policymakers must divide the money by December to cover rising health-care costs, measures to stimulate the economy and the growing debt.

While the 48.2 trillion yen ceiling is slightly higher than the 47.6 trillion yen initially earmarked for the current fiscal year, it will force government ministries to reassess their programs and cut superfluous costs, Vice Finance Minister Koichi Hosokawa said.

“Believe me, we are imposing extremely strict budgetary constraints on ministries,” he said in a recent news conference.

Limits have been placed on requests in the three categories of policy-related funding.

The cap for public works-related funding is set at 8.4 trillion yen, down 3 percent from fiscal 2004 outlays. The maximum for discretionary policy-related spending is down 2 percent at 6.8 trillion yen. The limit on fixed spending, including wages and pension payouts, is up 960 billion yen at 33 trillion yen.

The figures have left officials in the Kasumigaseki government district fuming.

Health, Labor and Welfare Ministry bureaucrats and ruling coalition politicians were particularly upset this week.

The ministry estimates 1.1 trillion yen in additional funds will be needed in fiscal 2005 to cover rising medical costs and pension payments and argues that the ceiling on fixed spending should have been raised by 1.2 trillion yen.

One-third of public social security payments comes from government coffers.

But business leaders in the prime minister’s Council on Economic and Fiscal Policy say there is rampant waste in government programs and insist there is more room for cuts.

Massive fiscal spending projects over the last decade to resuscitate the economy have left the nation with an estimated 719 trillion yen in public debt in the current fiscal year, which equals more than 140 percent of the nation’s gross domestic product in fiscal 2003.

Although most of the debt is held by Japanese, Finance Ministry officials worry about finding buyers of new Japanese government bond issues to keep fiscal policy afloat.

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