New bond issues to be cut by trillions in 2007

Compiled From Kyodo, Staff Reports

New government bond issues next fiscal year will be cut by several trillion yen to help to slim the snowballing debt, Finance Minister Koji Omi said Tuesday.

Omi’s comment echoed one earlier in the day by Prime Minister Shinzo Abe, who stressed governmental efforts to stick with financial reforms in light of recent opinion polls showing that support for him is weakening.

“To stick to a policy to improve the state’s financial health, I have decided to step up spending reductions and drastically cut the amount of new bond issues in fiscal 2007 below the 29.97 trillion yen initially planned for issue in fiscal 2006,” Chief Cabinet Secretary Yasuhisa Shiozaki quoted Abe as saying after a Cabinet meeting.

The government’s top spokesman said Abe isn’t ready to specify an exact amount, but Omi later told a news conference it should not go as low as 1 trillion yen.

The cut is possible because tax revenues are rising thanks to the pickup in the economy, Shiozaki said.

Tax revenues for the budget’s general account are expected to exceed 50 trillion yen for the first time since fiscal 2000, or more than 4 trillion yen than originally estimated.

The fiscal deficit has been swollen by a decade-long economic slump and temporary stimulus packages from the 1990s. Junichiro Koizumi tried to cap new government bond issues at 30 trillion yen when he was prime minister but was forced to break the cap a few times.

Abe also said Tuesday the government will review automobile taxes so it can use the revenues for something other than road construction. He ordered Shiozaki to lead talks on reviewing the taxes, the chief Cabinet secretary said.

An opinion poll released Monday showed that Abe’s support rate had fallen 14 points to 53 percent over the past two months.