Government Adopts Belt-Tightening Budget for Fiscal 2003.

(From Journal of Japanese Trade & Industry (JJTI))

The Japanese government has approved a belt-tightening \81.789 trillion general account budget for fiscal 2003 (April 1, 2003 to March 31, 2004) that features a record issuance of government bonds to make up for declines in tax revenue. The budget was submitted to the ordinary Diet session that opened on Jan. 20, along with a \2.460 trillion supplementary budget for fiscal 2002. Both budgets are expected to be approved without revision.

The fiscal 2003 budget marks a 0.7% increase from the initial budget for fiscal 2002, marking the first rise in three years. It is characterized by an increase in the issuance of new government bonds to cover falling tax revenues and by a cut in public works spending and other main expenditures.

Newly issued government bonds will come to \36.445 trillion, including \30.025 trillion of deficit-covering bonds, both record amounts on an initial budget basis. At the end of fiscal 2003 (March 31, 2004), the balance of the issuance of government bonds will reach a total of \450 trillion, 11 years' worth of tax revenues, while the balance of long-term national and local debts is expected to soar to \686 trillion, further deteriorating the nation's fiscal situation.

The government hopes the fiscal 2003 budget and the supplementary fiscal 2002 budget will help to underpin the economy, but cutbacks in expenditures in addition to reductions in pension payments and the burden of heavier medical costs could plunge the economy deeper into a deflationary spiral.

Prime Minister Koizumi Jun-ichiro refuted criticisms of his fiscal 2003 budget, saying, "The new budget is worthy of criticism if it is a free-spending budget. But criticism of a belt-tightening budget at this time is pointless."

General expenditures represent an expansion of 13% from what they were 10 years ago at the time of Miyazawa Kiichi's Cabinet, but tax revenues have fallen 32% since then, due to ...