Cabinet OKs over 1 tril. yen for growth steps, 10% spending cut+

TOKYO, July 27 Kyodo -
Prime Minister Naoto Kan's Cabinet on Tuesday endorsed plans to earmark more
than 1 trillion yen to promote economic growth in the fiscal 2011 state budget
and impose a 10 percent policy-related spending cut across all ministries and
agencies to fund the stimulus outlay.
The special allocation of over 1 trillion yen will be secured within the
government's promised spending limit of 71 trillion yen, almost the same as
that planned for the current fiscal year from April, which thus requires the
ministries to drop or scale down some of their existing programs.
Kan aims to rein in Japan's massive public debts and rebuild state finances to
avoid a Greek-style sovereign debt crisis, but the road ahead will likely be
bumpy as he has lost some of his clout within his ruling party since its loss
in the July 11 upper house election.
The 10 percent blanket cut also raised eyebrows among some Cabinet members, who
claimed it was unfair because they slashed by a considerable amount fiscal 2010
spending by their ministries or that most of their institutions' spending is
personnel expenses that are hard to rein in.
The difference of opinion among ministers is simply ''a symbol'' of the process
of budget compilation controlled by politicians and not by bureaucrats, Kan
told reporters Tuesday evening.
Subject to the uniform cut will be policy-related outlays totaling around 24
trillion yen of the 71 trillion yen, chiefly excluding social security-related
expenses and grants to local municipalities.
If the spending is cut by 10 percent, the government can raise around 2.4
trillion yen and part of the money will cover expected increases of 1.25
trillion yen in social security costs amid the aging of society.
Only the remaining -- a little more than 1 trillion yen -- will likely be
allocated for the special steps aimed at beating deflation, spurring economic
growth and ensuring people's livelihoods.
The guidelines on budget requests adopted in the day's Cabinet meeting demand
that the government earmark ''an amount considerably in excess of 1 trillion
yen'' for such steps.
The target figure came in smaller than the 2 trillion yen Kan's Democratic
Party of Japan had urged the government to set aside for the special spending,
but DPJ executives continued to press the government to raise 2 trillion yen or
more.
Finance Minister Yoshihiko Noda said the government will continue its efforts
to eliminate wasteful spending to squeeze out more funds during budget
planning, which will start in September, in cooperation with the government's
cost-cutting body -- the Government Revitalization Unit.
''We will make all-out efforts to achieve the figure across the board,'' he
said at a press conference Tuesday evening.
The government bodies will work out their spending plans based on the
guidelines and submit them to the Finance Ministry by the end of August, and a
draft budget will be drawn by December.
Among some unprecedented efforts, the government also plans to conduct a policy
contest to canvass public opinion regarding the policies to be pursued under
the stimulus spending, although they did not elaborate on details, and
introduce incentives to ministries that cut more existing outlays.
The guidelines urge the government to cap general-account spending, excluding
debt servicing costs, at 71 trillion yen and the amount of new government bond
issuance at 44 trillion yen, also the same level for the current fiscal year,
in line with the government's medium-term fiscal reform framework through
fiscal 2013.
The DPJ-led government set up the special allocation in an apparent bid to
highlight that politicians, not finance ministry bureaucrats, are taking the
lead in budget formulation.
But Kan has come under criticism for scaling down the already insubstantial
presence of the National Policy Unit, which the DPJ launched when it swept to
power last September with the aim of wresting control from powerful bureaucrats
in laying out basic policies and state budgets.
==Kyodo
2010-07-27 23:24:37