Japan`s FY 2011 budget to limit gov`t spending below 71 tril. yen

TOKYO, July 20 Kyodo -
The Cabinet of Prime Minister Naoto Kan approved a plan Tuesday to limit
general-account spending for fiscal 2011 to below the 71 trillion yen planned
for fiscal 2010, as it aims to form a budgetary guideline for the new fiscal
year by the end of this month.
The Democratic Party of Japan-led government will allocate funds to areas with
high growth potential such as healthcare and the environment to implement its
new growth strategy as well as policies that the DPJ promised during the
campaign for the July 11 upper house election, according to the outline issued
Tuesday.
Finance Minister Yoshihiko Noda said that there is no change in the
government's target of capping the amount of new government bond issuance for
fiscal 2011 below 44 trillion yen planned for the current year, although the
outline made no mention of the target.
Unlike the so-called budgetary ceiling set by the previous Liberal Democratic
Party-led government, the envisaged guideline will rather comprise ''rules on
how to carry out drastic changes (in budget allocations) within the 71 trillion
yen,'' Noda said at a press conference.
''We will flesh out the details (of the policy)'' including whether to set a
ceiling on budget requests by each ministry and agency, he said.
The plan to cap general-account spending, which includes grants to local
governments but excludes debt servicing costs, below 71 trillion yen is in line
with the government's medium-term framework through fiscal 2013, which was
issued last month.
The government was considering asking ministries to cut their policy-related
outlays by around 10 percent across the board compared with the levels for
fiscal 2010, but failed to include the plan in Tuesday's outline amid
opposition from some Cabinet ministers such as Land, Infrastructure, Transport
and Tourism Minister Seiji Maehara.
The government is eying setting up special reserves to implement steps aimed at
boosting economic growth by using part of the funds secured by the 10 percent
cutback.
According to Chief Cabinet Secretary Yoshito Sengoku, the guideline will likely
gain Cabinet endorsement by the end of July.
The DPJ's policy research council also launched discussions Tuesday on the
budgetary guideline so as to lay out its own proposal and submit it to the
government possibly this week.
The outline urges each minister to make bold changes to expenditures on a
voluntary basis, while calling on the prime minister to lead a drastic review
of spending on items that concern several ministries.
But it remains unclear how far Kan can demonstrate leadership in budget
compilation after the DPJ's setback in the House of Councillors election.
Japan endorsed in June a long-term fiscal reform policy through fiscal 2020
along with the medium-term framework, as it is under pressure to rebuild its
finances amid ballooning public deficits.
==Kyodo