Prime Minister Shinzo Abe said his administration will “make every effort to steadily achieve” its fiscal rehabilitation goal in fiscal 2015, while promising to streamline public spending.
Abe’s remarks came during a meeting Monday of the Council on Economic and Fiscal Policy, where the administration presented the basic outline of the fiscal 2015 budget.
According to the outline, new debt issuance will be kept below that of this year and the administration will review expenditures, including those for social security programs that have been ballooning due to the rapidly graying population.
Abe’s government has pledged internationally to halve the ratio of the primary balance deficit to gross domestic product by fiscal 2015 from the fiscal 2010 level, and turn the balance into a surplus by fiscal 2020.
A deficit in the balance means the nation can’t finance government spending other than debt-servicing costs without issuing new bonds. An improvement in the balance is viewed as the critical first step toward fiscal consolidation.
The basic outline is scheduled to be endorsed by the Cabinet on Saturday and will be reflected in the fiscal 2015 budget that will be crafted next month.
The administration vowed in the outline to “absolutely” implement a consumption tax hike to 10 percent in April 2017, which was postponed by 18 months amid the economic slowdown caused by increase last April to 8 percent.
It also committed to mapping out a concrete strategy by next summer to attain its fiscal reform goal in the 2020 business year.
The nation’s fiscal health is the worst among major industrialized economies, with public debt at more than 200 percent of GDP.
In another development, the administration and the ruling bloc decided to reduce the tax exemption for stock dividends that companies receive, as a measure to offset the corporate income tax cut planned in fiscal 2015, lawmakers said.
And in an attempt to support venture businesses and business restructuring as well as to invite foreign firms to Japan, lawmakers said they have agreed to provide tax breaks to newly formed enterprises.
Record spending planned
The Abe administration is considering setting the scale of general account spending at a record ¥97 trillion to ¥98 trillion in its initial draft for the fiscal 2015 budget, informed sources said.
Although the spending is set to reach an unprecedented amount, it is still below the ¥101.7 trillion requests by government ministries and agencies. The difference will be made up mainly by slashing social security spending.
Social security costs topped ¥30 trillion in the initial budget for this year, and next year this area is estimated to post a “natural increase” of ¥830 billion, due chiefly to rises in spending on pensions as well as medical and nursing services in line with the aging population.
Still, the administration aims to slash social security spending. The sources said Monday that one way will be to cut, for the first time in nine years, nursing care fees received by service operators.
The Cabinet is expected to approve the draft budget by Jan. 14.
In fiscal 2015, tax revenue is expected to total ¥54 trillion to ¥55 trillion on the back of a corporate earnings recovery, up sharply from slightly over ¥50 trillion estimated for the current fiscal year.
The amount of new Japanese government bonds to be issued in fiscal 2015 will be cut by some ¥3 trillion from the fiscal 2014 level to around ¥38 trillion.
The administration has set a goal of halving the primary budget deficit by fiscal 2015 from 6.6 percent of gross domestic product in fiscal 2010.
The administration will highlight its commitment to promoting spending cuts in order to realize the fiscal reconstruction goal, as shown by a draft of basic budget compilation policy discussed by members of the Economic and Fiscal Policy Council on Monday.
In the fiscal 2015 initial budget, the administration is considering setting policy expenditures, excluding debt-servicing costs, at around ¥74 trillion. It plans to allocate ¥6 trillion for public works projects, almost unchanged from the fiscal 2014 level, while allowing defense-related spending to increase.
Debt-servicing costs are estimated at ¥25.82 trillion on a budget request basis, but the figure could fall below ¥25 trillion thanks to recent drops in interest rates, the sources said.