A ¥4.4 trillion supplementary budget for the current fiscal year, which runs through the end of March, was enacted by the Upper House on Thursday evening, clearing a major political hurdle for the Abe administration.
The authorization will allow Abe’s team to focus on preparations for the full-year budget committee sessions for fiscal 2020. Supplementary budgets for a given fiscal year must be enacted before budget committee sessions for the following fiscal year can begin.
More than half of the massive spending package — ¥2.3 trillion — is earmarked for disaster recovery measures and other public works projects, such as those to repair facilities damaged by typhoons and heavy rain last year and to increase the height of river banks.
Meanwhile, ¥917.3 billion is set to be spent on preparing for unexpected “risks” to the economy, such as possible slowdown in the Chinese economy and adverse effects from the U.S.-China trade war.
Another ¥1.08 trillion is allocated for projects to prop up the economy beyond the Tokyo Games this summer, including ¥110 billion to help with establishing “post-5G” mobile phone infrastructure, government officials said.
In December, the administration adopted a massive ¥26 trillion stimulus plan, including the newly enacted supplementary budget. According to the government’s estimate, the plan is expected to boost gross domestic product by 1.4 percent.
Analysts, however, have said that many items in the ¥4.4 trillion budget do not look as “urgent” as is claimed by the government, and could have been included in the fiscal 2020 budget. Compiling such a supplementary budget every year has significantly loosened fiscal discipline within the government, they have suggested.
Some of the public works projects, for example, will include building more roads and underground telephone lines, which are often sought by rural politicians and construction firms that support the ruling Liberal Democratic Party.
The measures to counter unexpected risks include ¥384.7 billion to improve the productivity of small businesses and ¥342.8 billion to support farmers, including funds to promote exports of agricultural products. Meanwhile, the post-Tokyo Games budget includes ¥231 billion for the Global and Innovation Gateway for All schools initiative, which aims to provide a personal computer for every schoolchild.
“I think increasing economic growth is indeed necessary, but if so, then you need to include the money in the initial budget for an upcoming fiscal year and closely examine it,” said Keiji Kanda, a senior economist at the Daiwa Institute of Research.
“If you include it in a supplementary budget, the time you spend examining it is short so it tends to be lax.”
Kanda also said that the economy is gradually recovering, questioning whether it was necessary to draw up a supplementary budget just to “shake off uncertainties in a preventive sense.”