It is essential to secure budgets that are necessary while also strictly ruling out projects that are needless or not pressing. The Finance Ministry should strive to carry out properly weighed budgetary assessments in preparation for the compilation of a fiscal budget at the end of the year.
Budgetary requests from each ministry and agency for fiscal 2020 have closed. The amount of requested appropriations is expected to reach a record high of as much as ¥105 trillion, which would significantly exceed the ¥102.8 trillion of the preceding fiscal year.
The initial budget for fiscal 2019 topped ¥100 trillion, marking the first time such a budget surpassed that level. This was largely due to the inclusion of about ¥2 trillion in appropriations for measures aimed at coping with a rise in the consumption tax rate. If the scale of the budget for fiscal 2020, when the impact of the tax increase is likely to lessen, exceeds that of the preceding fiscal budget, it must be said that fiscal discipline is lacking.
The tax revenue for fiscal 2018 reached a record high of ¥60.4 trillion, surpassing the ¥60.1 trillion of fiscal 1990, during the bubble-economy era.
However, the latest tax revenue only accounted for about 60 percent of expenditures, with the rest of the outgoings covered with debt. The national government’s outstanding liabilities exceed ¥1 quadrillion — the worst fiscal condition among advanced countries. This stark reality must not be forgotten.
No optimism is warranted for the future, either. In July, the government announced an estimate for fiscal conditions, in which it said the national and local governments’ primary balance deficits in fiscal 2025 will likely become worse than an earlier projection. This is due to tax revenue reductions expected to be caused by a downward swing in the nation’s growth rate because of the intensified trade friction between the United States and China.
Stem wasteful expenditures
Currently, national debt-servicing costs — expenditures needed to redeem government bonds and pay interest on them — are being curbed due to low interest rates. If interest rates rise, however, the burden in this respect is bound to swell. It is advisable to stem the increase in expenditures now.
The focus of the matter is how to curtail social security costs, which account for one-third of the budget. A natural increase in spending due to the aging of society is estimated at ¥530 billion. It is essential to curtail the increase as much as possible through such means as cuts in government-set pharmaceutical prices.
Budgetary requests from the Land, Infrastructure, Transport and Tourism Ministry for public works projects total ¥6.3 trillion. It is important not to spare budgetary appropriations aimed at protecting the lives of people in the event of disasters and other incidents, but wasteful spending must be eliminated.
This time, too, a special quota of ¥4.4 trillion in appropriations for growth fields has been established. Emphasis should be placed on measures effective for that objective. Drastic steps should be taken to prevent such appropriations as those for overlapping measures devised by different ministries and agencies, and also policies formulated by rehashing conventional ones.
In the private sector, progress is being made in the promotion of open innovation through which a broad range of expertise from different types of business are brought together, in the development of such technologies as self-driving systems and next-generation 5G communications standards. At a national government level, too, efforts should be widened to formulate policies and make budgetary requests in a manner that transcends the boundaries of ministries and agencies.
A high-profile item to be included in the fiscal 2020 budget is job-finding assistance for people in the so-called ice-age employment generation. An office in charge of promoting such efforts across ministries and agencies has been established at the Cabinet Secretariat. If budgetary requests are sorted out according to each type of policy, it will be possible to improve efficiency in this respect.
Another matter requiring consideration is the adjustment of budgetary requests among ministries and agencies in advance. Budget-compilation reforms, including how requests for appropriations should be made, must be carried out.
(From The Yomiuri Shimbun, Sept. 2, 2019)