ID :
121687
Wed, 05/12/2010 - 15:57
Auther :

Japan Faces Difficult Hurdles over 44-T.-Yen Debt Cap



Tokyo, May 12 (Jiji Press)--Japan needs to surmount difficult
hurdles in order to achieve a 44.3-trillion-yen cap on new government debt
issuance for fiscal 2011 proposed by Finance Minister Naoto Kan.
Kan on Tuesday unveiled the idea of limiting the year's government
debt issuance, excluding financing bonds, at or below the record amount
planned for fiscal 2010.
The global crisis of confidence in sovereign bonds touched off by
Greece's debt woes led Kan to conclude that Japan cannot keep increasing its
government bond issuance.
But the cap is hard to implement as Prime Minister Yukio Hatoyama
rules out a consumption tax hike during his term of office. In addition, the
government's efforts to secure financial resources by slashing wasteful
spending are approaching their limit.
Hatoyama was cautious toward Kan's proposal. Late Tuesday, the
prime minister told reporters that the limit is not a target adopted by the
government.
The Finance Ministry estimates the government debt issuance for
fiscal 2011 will reach 51.3 trillion yen, up 7 trillion yen from the level
projected for the preceding year, even if the government freezes planned
costly policy steps such as distributing child allowances in full.
Social security costs will rise 1.1 trillion yen unless any new
spending curbs are implemented and the government needs 2.5 trillion yen to
maintain the current share of government contributions to basic public
pension premiums, the ministry says, explaining the reasons for the debt
expansion.
If the government wants to implement these costly measures as
scheduled now, it will have to secure new financial resources of more than 5
trillion yen.
In order to limit the debt issuance to 44.3 trillion yen, the
government needs to slash spending further or raise taxes, or do both.
The Government Revitalization Unit will resume its "shiwake"
screening process later this month to examine public-interest corporations
for any projects that can be trimmed or scrapped.
But it is unlikely the process will lead to a dramatic decrease in
government spending, a senior Finance Ministry official said.
At a news conference on Tuesday, Kan said the current economic
situation may not justify a budget cut. If so, debt and tax revenue will be
all that remains, he went on, indicating his readiness to consider a tax
hike.
Kan's debt cap will remain difficult even if the government keeps
its general-account budget level unchanged from the fiscal 2010 level of
some 92 trillion yen.
The Finance Ministry forecasts that Japanese tax revenue will stay
low at 38 trillion yen in fiscal 2011.
Nontax revenue is put at 4 trillion yen, far lower than in fiscal
2010 when it is projected to shoot up to 10.6 trillion yen due to government
efforts to cut wasteful spending.
Even if the debt issuance is limited to 44.3 trillion yen, the
government would face a 6-trillion-yen gap between its spending and revenue.
If the government wants to close the gap through a consumption tax hike
alone, it would need to raise the tax rate by more than 2 percentage points
from the current 5 pct.
END


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