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Editorial: Draft budget shows lack of focus, no fiscal discipline

  • December 25, 2021
  • , The Asahi Shimbun , 12:50 p.m.
  • English Press

The government’s draft budget for fiscal 2022, approved by the Cabinet on Dec. 24, fails to deliver a clear message about the administration’s policy priorities while obscuring the alarming reality of Japan’s state finances. It suggests the government is using all the tricks in the fiscal playbook to give the impression that it is maintaining fiscal discipline. How long does it intend to continue formulating budgets in such an irresponsible manner?

 

The spending plan calls for a record 107.6 trillion yen ($935.2 billion) in government expenditures during the year that starts in April. Growth in social security spending, which accounts for one-third of the total, has been curbed to an increase of 400 billion yen from the previous year through cost-cutting measures, including trimming payments to hospitals and clinics under the public health care insurance program.

 

Proposed outlays under other budget categories are mostly in line with guidelines set by the government’s Council on Economic and Fiscal Policy in the annual “Basic Policy on Economic and Fiscal Management and Reform,” known as “honebuto no hoshin” (big-boned policies). But the spending blueprint includes a record 1.4 trillion yen in appropriations for science and technology research to bolster Japan’s scientific and technological competitiveness.

 

Despite the COVID-19 pandemic, businesses are reporting better earnings performances than expected. The government’s tax revenues for the next fiscal year are projected to hit 65.2 trillion yen, up nearly 3 trillion yen from the figure for fiscal 2019, when the impact of the pandemic had yet to kick in. The expected robust revenue growth notwithstanding, the government will still have to finance 34 percent of its total spending with borrowing.

 

Even more alarming is the fact that the nation’s fiscal health is actually in much worse shape than the dire deficit financing figure indicates.

 

Tucked into the 36-trillion yen supplementary budget for the current fiscal year, which passed the Diet on Dec. 20, are nearly 10 trillion yen worth of outlays unrelated to the pandemic, including funding for defense equipment purchases and public works. Many of these expenditures should not be financed by an extra budget, which is supposed to fund “urgently needed” spending, such as responses to natural disasters. They should instead be accounted for in the initial budget. The government should stop misusing supplementary budgets to give the initial budget the appearance of fiscal discipline.

 

Explaining the rationale for compiling such a massive supplementary budget, Prime Minister Fumio Kishida said his administration is working to “reboot the economy for the nation’s future.”

 

“It is the government’s political responsibility to secure funds for necessary policy measures,” he stated.

 

Be that as it may, it is also the government’s political responsibility to secure necessary fiscal resources to finance such measures through sweeping budget reform, tax increases and other steps.

 

But the government has effectively abandoned all efforts to prioritize more carefully on government spending in response to funding needs related to the pandemic. The proposed expenditures on key budget items in the draft budget, such as social security and science and technology research, represent nothing but tiny changes of around 1 percent from the numbers for the current fiscal year.

 

In formulating the draft budget, the government dropped the passage calling for “thorough reviews of all expenditures without sanctuary” from its basic budget guidelines in response to an objection from the ruling Liberal Democratic Party. The government should not be allowed to keep expanding its deficit spending through inertia simply by shifting the burden to future generations.

 

The budget blueprint, like the budget for the current fiscal year, also includes as much as 5 trillion yen in contingency funds for possible measures to deal with the pandemic that the Cabinet can use without the sanction of the Diet.

 

For sure, it is necessary to set aside funds for policy responses to unexpected situations concerning the pandemic. But this policy imperative does not justify any step that could eviscerate the function of the Diet to monitor government spending that is provided for in the Constitution.

 

When it taps the contingency funds, the government needs to explain in advance to the Diet how the money will be used and win the legislature’s approval.

 

–The Asahi Shimbun, Dec. 25

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