The Yomiuri Shimbun
A record 49 percent of the revenue in the government’s general account in the fiscal 2012 budget comes from government bonds.
In a draft of the budget, which the Cabinet approved at an extraordinary meeting Saturday, the amount in the general account totals 90.33 trillion yen. This figure is 2.2 percent lower than that in the fiscal 2011 initial budget, marking the first year-on-year decrease in six years.
However, this figure does not include 3.77 trillion yen in a separate account for reconstruction work following the March 11 disaster and another 2.59 trillion yen for maintaining state contributions to basic pension benefits.
If these funds are included, the budget’s actual size becomes the largest ever, at about 96.7 trillion yen.
The amount of new government bond issuance–or new government debt–will remain around the same level as the previous fiscal year at 44.24 trillion yen, which exceeds estimated tax revenue of 42.34 trillion yen.
If the Diet passes the budget, it will be the third year in a row that new government debt will exceed tax revenues.
At a press conference after the Cabinet meeting, Finance Minister Jun Azumi emphasized the need to take measures to increase government revenues.
“Considering the European [sovereign debt crisis], reliance on government bonds has reached its limit. We have reached a point where we have to reexamine the tax revenue structure itself by raising the consumption tax rate or other means,” he said.
The government expenditure for implementing policy measures, excluding spending to redeem government bonds–or the repayment of debt–would fall 3.5 percent from the previous year to 68.39 trillion yen.
The reason for the fall is that the government postponed a decision over how to secure revenue sources to cover shortages in state contributions to the public pension program.
Funds in the state coffers are about 2.59 trillion yen short. The government deferred the decision by issuing special bonds for the pension schemes the government plans to cover with a consumption tax hike in the future.
In the draft, social security spending was set at 26.39 trillion yen, down 8.1 percent. However, if the amount in the state coffers to finance the basic public pension is included without being postponed, the actual expenditure will be 0.4 percent higher.
The natural increase in social security spending of about 1.16 trillion yen is due to the aging of the nation’s population.
Social security spending accounts for 51.5 percent of all spending to implement policy measures in the draft.
Tax allocation grants, which make up part of the central government’s tax revenues to be distributed to local governments, are expected to fall 1.1 percent to about 16.6 trillion yen.
The actual amounts that local governments will receive in this category would rise by 0.5 percent because other money sources such as unused funds from fiscal 2011 supplementary budgets will be used.
The portion of the draft budget for reconstruction from the Great East Japan Earthquake is 3.78 trillion yen, which will be earmarked in a new special account.
Of this amount, direct costs for reconstruction efforts, such as additional public works projects and tax allocation grants to disaster-hit local governments, amounts to 3.25 trillion yen.
If this figure is added to spending for recovery work in the first to third supplementary budgets for fiscal 2011, the total reconstruction budget exceeds 18 trillion yen, approaching the government’s estimate of 19 trillion yen needed during the first five-year reconstruction period.
Government tax revenues are estimated to increase 3.5 percent due to economic recovery since the disaster and a rise in demand for reconstruction work. If realized, tax revenues will increase for the second straight year.
Nontax revenues, including reserves in special accounts dubbed “buried treasure,” are expected to fall by 47.9 percent to 3.74 trillion yen, the lowest figure in nine years.
The government will submit the fiscal 2012 draft budget to an ordinary Diet session scheduled to convene in January. However, its passage will be rocky as the opposition camp holds a majority in the upper house.