Regional economic funding to fall 40%

Fiscal 2014 budget includes ¥610 million cut for municipalities


Outlays to bolster regional economies will be slashed by 40 percent in the fiscal 2014 draft budget to ¥610 billion, Finance Minister Taro Aso and internal affairs minister Yoshitaka Shindo agreed Saturday.

The general account budget will meanwhile swell to a record-high ¥95.88 trillion, they said.

Reducing regional outlays for a second consecutive year would shrink tax allocations to local governments by ¥170 billion to around ¥16.89 trillion. The Cabinet of Prime Minister Shinzo Abe plans to approve the draft budget Tuesday.

As Abe has pledged to end nearly two decades of deflation, public expenditures — including for public works projects and social security but excluding debt-servicing costs — will reach a record-high ¥72.61 trillion in fiscal 2014, which begins in April, up ¥2.2 trillion from the draft budget for the current year.

Abe’s team will meanwhile curb new issuance of government bonds to ¥41.25 trillion, down ¥1.6 trillion from a year ago, since restoring Japan’s precarious fiscal health is also urgent.

Citing a pickup in local tax revenue, the Finance Ministry has called for halving or abolishing outlays to local economies that have been earmarked since fiscal 2009 to cushion the impact of the global financial crisis. But the Internal Affairs and Communications Ministry, which oversees municipalities, has lobbied to maintain the funding, arguing a sharp cut would affect local government administration.

Despite the envisaged reduction, a hoped-for economic recovery and the sales tax hike to 8 percent from 5 percent in April are projected to expand local tax revenue by ¥1.4 trillion. Together with local tax allocations and issuance of local bonds, municipalities would receive a total of ¥60.36 trillion, an increase of ¥610 billion from the current fiscal year.

“We will try to bring about strong economic growth while ensuring economic recovery all over the country,” Abe said during a meeting of his ruling Liberal Democratic Party and junior coalition partner New Komeito later Saturday.

The government has proposed — on the international stage — halving the ratio of Japan’s primary balance deficit to gross domestic product by fiscal 2015 from the fiscal 2010 level. It further aims to return the balance to a surplus by fiscal 2020.

A deficit means the nation cannot finance government spending other than debt-servicing costs without issuing new bonds.

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