Japan’s fiscal 2007 general account budget is expected to total 82.73 trillion yen, based on requests from government ministries and agencies, up 3.04 trillion yen from the initial budget for the current fiscal year, Finance Ministry officials said Wednesday.

The increase in budget requests for the year starting next April includes a projected 1.93 trillion yen rise in debt-servicing costs, to 20.69 trillion yen, the officials said.

The figure assumes long-term interest rates will average 2.9 percent in fiscal 2007.

Core policy-related outlays in the general account will be capped at 46.81 trillion yen, up 440 billion yen from the initial fiscal 2006 budget. Grants to local governments are expected to total 15.23 trillion yen, up 670 billion yen.

Budgetary requests from the ministries, which must be submitted by Thursday, will form the basis of the fiscal 2007 initial budget to be drawn up by the Finance Ministry. The final budget will be compiled by the end of December.

Finance Ministry officials said the ministry will scrutinize the budget requests and cut the total to less than current-year levels to rein in the budget deficit.

The Cabinet on July 21 set a limit on general expenditures of 46.8 trillion yen in the fiscal 2007 budget, the lowest level in nine years.

The planned cuts in policy outlays, such as those for public works projects and defense, are in line with the government’s fiscal reform blueprint.

The government calls for 11.4 trillion yen to 14.3 trillion yen worth of spending cuts over the next five years to achieve a primary (before debt-servicing costs) budget surplus by fiscal 2011.

The government and ruling coalition agreed to meet the fiscal 2011 target, covering budget expenditures entirely from revenues without relying on new bond issues.

FILP to get 2.5% cut

The Finance Ministry plans to cut its “zaito” fiscal investment and loan program for fiscal 2007 by around 2.5 percent from the initial outlays for the current fiscal year, bringing it below 15 trillion yen for the first time in 29 years, ministry officials said Wednesday.

Spending under the zaito program for fiscal 2007, which starts next April, is expected to total around 14.63 trillion yen, down from 15 trillion yen under the initial fiscal 2006 plan.

The fiscal 2007 figure, if approved, will mark the eighth straight annual drop and fall below 15 trillion yen for the first time since the initial budget of 14.89 trillion yen for fiscal 1978.

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