Hatoyama Cabinet OKs record 92 trillion yen budget for FY 2010+

TOKYO, Dec. 25 Kyodo -
Prime Minister Yukio Hatoyama's Cabinet approved on Friday the largest-ever
budget of 92.30 trillion yen for fiscal 2010, meeting his self-imposed target
of winding down the drafting process by the end of the year after a long
struggle.
''I want to term this a budget to protect people's lives,'' Hatoyama said at a
news conference shortly after the endorsement.
But the size of the general-account budget turned out to be bigger than
Hatoyama had hoped for, despite his ambition to slash wasteful spending, adding
fuel to long-simmering anxieties about the country's fiscal health.
The amount ballooned from this fiscal year's initial budget of 88.55 trillion
yen, relying on new debt issuance and nontax receipts at unprecedented levels.
Amid the economic downturn, tax revenues are projected to fall to 37.40
trillion yen, the lowest level since fiscal 1984.
As a result, the Cabinet has to issue 44.30 trillion yen in new government
bonds, an increase of 33.1 percent from what was planned under the previous
initial budget.
The latest amount is equal to the sum of the issuance the previous government
had penned for the initial budget and the first extra budget in fiscal 2009.
In that regard, Hatoyama fulfilled his promise as he had repeatedly vowed to
cap the issuance of new government bonds at around 44 trillion yen to avoid a
loss of investor confidence in the bond market.
However, it is the first time that new debt issuance has exceeded tax revenues
in the postwar period on an initial budget basis, according to the Finance
Ministry.
''We were able to barely stay at a level in which we can maintain fiscal
discipline,'' Hatoyama said, warding off criticism that the budget proposal
represents runaway spending.
''The most important is to protect people's lives,'' he said. ''For this, I
will make a necessary budget.''
Hatoyama also said he is proud that the Cabinet played a central role in
formulating budgetary matters, instead of Japan's powerful bureaucracy during
the Liberal Democratic Party's long time in power.
Of the 92,299.2 billion yen budget, general expenditures amounted to 53,454.2
billion yen, also an all-time high, up from 51,731.0 billion yen in the initial
budget for fiscal 2009.
The budget for the year starting in April bloated, with new spending on
campaign pledges by the Democratic Party of Japan ranging from providing a
monthly allowance for each child of junior high school age or younger to
introducing free high school education.
The decade-old DPJ, which swept to power in the August general election,
drafted a budget for the first time, with hopes of stimulating domestic demand
by providing more cash to households, instead of devoting trillions of yen to
big public works projects.
Reflecting the DPJ's motto of shifting the focus of spending ''from concrete to
people,'' social welfare costs will grow 2.43 trillion yen, or 9.8 percent, to
27.27 trillion yen, accounting for more than half of the core policy-related
outlays for the first time.
In contrast, the government decided to slash spending on public works projects
by 1.30 trillion yen, down a record 18.3 percent, from the initial budget of
fiscal 2009 to 5.77 trillion yen.
Expenditures on public works shrank to levels observed in the late 1970s,
according to the ministry.
Even so, to address even more serious economic problems in rural areas, tax
grants from the general account to local governments will rise 904.4 billion
yen from the year before to a record 17.48 trillion yen.
Debt servicing costs will total 20.65 trillion yen, down more than 1 trillion
yen from the Finance Ministry's initial plan on expectations that relatively
low interest rates will remain in place.
The DPJ-led government managed to downsize the budget from 95.04 trillion yen,
requested by ministries and agencies in October, but it remains uncertain
whether the public and market players will be satisfied with the outcome, given
that the ratio of total debt issues to total revenues has reached 48 percent,
the worst on record.
The DPJ -- though generous in offering support for child-rearing -- could not
avoid passing the increase in debt on to future generations.
It has become even more dubious as to whether the DPJ can implement all the
pledges in full scale, considering that they are estimated to require a total
of about 16.8 trillion yen over the coming four years.
From fiscal 2011, for example, the DPJ is planning to provide 26,000 yen every
month to families with children, instead of 13,000 yen in the upcoming fiscal
year, which will likely lay a heavier financial burden on the government.
Hatoyama, as well as Finance Minister Hirohisa Fujii, said Friday the key
pledges could be reviewed, especially in terms of monetary amounts, but not the
basic principle of improving everyday lives of the people.
On revenues, the government will secure a record 10.6 trillion yen from nontax
receipts, such as tapping into reserves and retained earnings in special
accounts.
Of the 10.6 trillion yen, 4.8 trillion yen will come from the Fiscal Loan Fund
Special Account and 2.9 trillion yen from the Foreign Exchange Fund Special
Account.
The budget draft will be submitted to the upcoming ordinary Diet session
starting in January.
==Kyodo