(Mainichi: January 21, 2016 – p. 6)
The supplementary budget for fiscal 2015, enacted on Jan. 20, is mainly designed to finance Prime Minister Shinzo Abe’s signature initiatives, such as the “creation of a society where all citizens are dynamically engaged” and measures related to the Trans-Pacific Partnership free trade pact. Though the government stresses that the objective is to boost economic growth and stimulate consumer spending, many experts question whether it can truly create such an impact.
Of the budget totaling 3.3213 trillion yen, 1.1646 trillion yen was earmarked to implement the policy of “creating a society where all citizens are dynamically engaged.” A key pillar is a special allowance project, which will cost 362.4 billion yen. The government plans to give away 30,000 yen per person to about 11 million pensioners who are 65 and above and exempt from residential tax payment by around June. It explains that “the aim is to distribute the fruits of tax increases to pensioners who are not benefiting from wage increases and to give a boost to consumer spending.”
But these effects are being called into question. “The money will be mainly allocated to senior citizens, who account for a significant share of the nation’s population and tend to vote, because of the upcoming House of Councillors election,” said Hidenori Suezawa, a financial market and fiscal analyst at SMBC Nikko Securities. “The cash handouts may be saved and probably won’t be used to stimulate spending.”
He also stressed: “The government should have made advance investments in the younger generation through such measures as child-rearing to lift the Japanese economy and create a virtuous cycle.”
Meanwhile, measures related to the TPP have secured 340.3 billion yen. The government will plow 94 billion yen into farmland improvement projects by incorporating requests from lobbyist politicians affiliated with the farm industry and the National Federation of Land Improvement Associations, a key support group of the Liberal Democratic Party. The money is aimed at bolstering the competitiveness of farmers, but the Upper House race also appears to be a factor.
The supplementary budget will be financed by tax increases and unspent funds in the budget for fiscal 2014. The issuance of new government bonds was slashed by 444.7 billion yen from what was initially planned in the budget for fiscal 2015 to pay a certain degree of consideration to fiscal integrity efforts.
The problem is that the government keeps using tax increases and unspent funds in previous years’ budgets to finance supplementary budgets rather than repaying debts. “The government is using up financial sources every year, while seeking to raise the sales tax due to a shortage of funds,” said Takeshi Minami, senior researcher at Norinchukin Research Institute. “That argument is contradictory.”