The government has suspended disbursement of some ¥2.5 trillion from the fiscal 2009 supplementary budget as it prepares to compile the fiscal 2010 budget. The government originally aimed to save ¥3 trillion, and use that money as part of some ¥7.1 trillion needed to implement election promises for fiscal 2010, such as child-rearing allowances, free public high school tuition and the abolition of surcharges on road-related taxes.
Even if the government secures the ¥3 trillion, it needs to obtain a further ¥4.1 trillion by axing wasteful and nonessential projects that might have been included in the fiscal 2010 budget, and by using surpluses in special accounts.
A big problem is that the government does not have much time left. Under normal circumstances, the work of compiling the fiscal 2010 budget should be in full swing by now, with completion by yearend. The government is using a method not typically used by past administrations, which may require a longer time.
The projected savings include ¥455.2 billion (27.7 percent) of the ¥1.643 trillion allocated to public works projects, ¥920.4 billion from special funds that the previous administration established for projects spanning two or more years, ¥476.3 billion from the farm ministry's budget, and ¥435.9 billion from the labor and welfare ministry.
Mr. Yoshito Sengoku, minister in charge of administrative reform, says the government's cull of projects will have neutral effect on the economy, but will it? The government must not risk sending the economy — which has yet to get back on a recovery path — into a second serious dip just to fulfill election promises.
Because of poor corporate performance, tax revenue in fiscal 2009 is expected to drop to around ¥40 trillion from the previously forecast ¥46 trillion. Social welfare costs increase by ¥1 trillion each year. The government should not hesitate to reconsider its plan to abolish road-related tax surcharges and to make expressways toll-free.