The government has approved a record ¥88.548 trillion budget for fiscal 2009. Marking an increase of 6.6 percent from the initial fiscal 2008 budget, it represents an attempt to keep the Japanese economy from suffering the worst effects of the global financial crisis.
Prime Minister Taro Aso said, “Unusual economic conditions require unusual responses.”
But it is unclear whether the budget will be effective, since the economy is rapidly deteriorating and the budget fails to convey a message that it is focused on strengthening the foundations for future economic growth. Just increasing the budget size by bundling the projects of various ministries could result in spreading money around without really stimulating the economy.
Following Mr. Aso’s wish to “protect people’s lives,” social security spending will amount to ¥24.834 trillion, up 14 percent from the initial fiscal 2008 budget and the fastest growth in 31 years. It includes ¥533.6 billion — a rise of more than 60 percent — to stabilize employment and improve job-seekers’ skills.
Spending for road improvement will drop by 8.8 percent to ¥2.464 trillion. Although the use of revenue from road-related taxes was freed up, about 88 percent of the money has ended up going toward road improvement anyway.
The worsening economy is reducing budget revenue. Tax revenues will drop by 13.9 percent from fiscal 2008 to ¥46.103. The government will issue bonds worth ¥33.294 trillion, covering 37.6 percent of the budget. The amount of government bonds outstanding will reach ¥581.1 trillion at the end of fiscal 2009. The government now must think ahead about the need for financial reconstruction.
Although the budget includes ¥2 trillion in cash benefits for all households, the Democratic Party of Japan will call for removing the measure and using the money more constructively. Even some Liberal Democratic Party lawmakers oppose the measure. If there are 17 such LDP Lower House members, they and the opposition bloc can kill budget-related bills. Difficult Diet proceedings await Mr. Aso.