The government plans to keep new debt issuance for fiscal 2010 below ¥44 trillion and try to reduce the issuance from that threshold as much as possible, according to a basic policy draft on the fiscal 2010 budget made available Monday.
The wording, however, may be modified before finalizing the basic policy because achieving that target would be difficult due to an expected shortfall in tax revenue in fiscal 2010, observers said.
The ¥44 trillion cap is a level expected by many market players, the draft says. It is also equal to the amount of new Japanese government bond issuance planned by the previous administration in fiscal 2009 after the first extra budget was drawn up.
"It is not that it should not exceed (¥44 trillion) by even ¥1," Prime Minister Yukio Hatoyama said Friday, indicating the government may consider issuing more if it is deemed necessary to weather the economic downturn.
The Democratic Party of Japan-led government expects tax revenue in fiscal 2010 to stay stagnant at around ¥37 trillion. The level is considerably insufficient to fund the fiscal 2010 budget, for which general account requests have amounted to a record ¥95.04 trillion.
The draft basic policy, which the government aims to endorse at Tuesday's Cabinet meeting, also states that the administration will work out in the first half of fiscal 2010 a medium-term fiscal management strategy covering several fiscal years and lay out a path toward fixing the nation's battered fiscal health.
It says the government should compile the strategy with an eye toward reducing the structural fiscal deficit and shrinking the ratio of public debt to gross domestic product in the medium to long term.
The basic policy also states the government will present by month's end the main points of new growth strategies focusing on such areas as employment, the environment, child-rearing, science and technology as well as Asia.