The ruling and main opposition parties are discussing ways the government could issue debt to fund the annual budget without having to legislate this authority, to avoid future replays of the current standoff obstructing public expenditures, sources said.
The negotiations — launched earlier this month between Prime Minister Yoshihiko Noda’s Democratic Party of Japan, and the Liberal Democratic Party and New Komeito — are expected to see new regulations created to cover the five years from next April, the sources said.
The three parties are considering modifying additional clauses of the debt bill that Noda’s Cabinet has submitted to the Diet, aiming to secure the consent of their respective policy chiefs as early as Monday.
The talks are being held because the divided Diet still hasn’t enacted a debt-issuance bill for the current fiscal year, leaving the government unable to secure money necessary to cover more than 40 percent of this year’s ¥92.41 trillion budget.
The government has already deferred some spending, including grants to local governments, but fears it will be forced to halt expenditures completely at the end of this month if the political deadlock persists.
The LDP and New Komeito’s cooperation in drafting new rules indicates they are seeking to avert the immediate worst-case scenario by enacting the debt-issuance bill during the current Diet session, which ends Nov. 30, and are also hoping to prevent the problem from resurfacing in future regardless of which party is in power.
The proposal the three parties are considering would allow the government to automatically issue a certain amount of deficit-covering bonds once the Diet approves the budget. Currently, the annual budget and debt bills must clear the Diet as separate pieces of legislation.
However, some lawmakers fear that if the Diet’s requisite approval of debt issuance is dropped, the government’s fiscal discipline might begin to erode.
Debt bills have been subject to much political wrangling in recent years, with opposition parties, which control the Upper House, pressing the ruling bloc to accept their demands in exchange for the legislation’s passage. This year, they urged Noda to clearly commit to dissolving the Lower House for a general election in return for cooperation in passing the debt-issuance legislation.