Concentrated allotment of budgets should be directed toward projects conducive to a revolution in human resources development. The government is being tested as to whether it will be able to bring about results rather than letting the new policy agenda become a mere slogan in its budget compilation policy.
The Finance Ministry has closed the acceptance of budgetary requests from government ministries and agencies for fiscal 2018. The total budgetary requests are estimated to top ¥100 trillion for the fourth consecutive year, a figure ¥3 trillion greater than the fiscal 2017 budget. The ministry will begin screening the requests in preparation for the state budget compilation for the next fiscal year at the end of this year.
Amid increasingly dire fiscal conditions, it is necessary to allocate limited fiscal resources on a priority basis. For this purpose, special quotas for allocating budgets to priority projects have been set for budgetary requests as in past years.
Special quotas totaling ¥4 trillion are set for investment in human resources development programs such as enrichment of lifelong education and in projects such as those contributing to regional economic development and improvement of the productivity of small and medium-sized companies.
Previously, the administration of Prime Minister Shinzo Abe set special budgetary quotas by putting forth such policy initiatives as creating “a society in which all citizens are dynamically engaged” and “overcoming population decline and vitalizing local economy.” But there was criticism that projects at the stage of making budgetary requests included more than a few that took advantage of those initiatives and did not necessarily conform to the policy intentions.
In screening the budgetary requests this time, the Finance Ministry needs to strictly scrutinize the effect of each project to prevent the pork-barreling of budgets.
Fiscal discipline vital
Social security spending, which accounts for the biggest portion of the state budget, is anticipated to increase by about ¥630 billion over fiscal 2017 due to the rise in medical care expenses amid the aging of the population. The government plans to curb that growth to ¥500 billion, the same level as in the previous fiscal year.
The biennial revision of medical service fees and the once-in-every-three year revision of nursing care benefits overlap this year for the first time in six years. It can be said that this provides a big chance to correct high cost structures, aiming to create a sustainable system.
To provide efficient and high-quality medical and nursing care services to future generations, revisions must be carried out without sanctuaries, including doctor’s technical fees. It will be unavoidable to call on the users of such services to bear financial burdens according to their income level.
Concerning the policy goal of making kindergarten and nursery school fees free, the focal point is how to raise the fiscal resources of more than ¥1 trillion needed to achieve it.
Measures emerging as possible options include increasing social insurance premiums premised on the establishment of a child insurance scheme, tax hikes and spending cuts in other fields. Measures must be contemplated prudently from such viewpoints as ensuring fairness of financial burdens between generations.
Tax revenue for fiscal 2016 recorded a year-on-year decrease for the first time in seven years. Due to the trend of a strong yen on foreign exchange markets and other factors, a rapid increase in tax revenue cannot be expected in the future.
In view of continued expansion in fiscal spending, it is impossible to see any prospect of achieving the government’s goal of turning the primary fiscal balance into the black in fiscal 2020.
The government plans to confirm in fiscal 2018 whether it is possible for the goal to be achieved. In compiling the budget for the next fiscal year, respecting fiscal discipline as much as possible should be the whole premise.