Japan's Cabinet approves record budget of 1.11 trln USD for FY 2011
The Cabinet of Japanese Prime Minister Naoto Kan on Friday approved a draft budget which hit a record 92.40 trillion yen (1.11 trillion U.S. dollars) for fiscal year 2011.
The figure is marginally higher than the initial budget for 2010, which stood at 92.30 trillion yen, as the government seeks to raise spending on key policies amid rising social welfare costs.
The budget will include more than 44 trillion yen (530.11 billion U.S. dollars) from issuing new government bonds, a second straight year when bonds have exceeded tax revenue as a source of income.
The swelling budget is believed to be contradictory to Kan's pledge to cut spending to restore the nation's fiscal health. Finance Minister Yoshihiko Noda said he hoped the 2011/12 budget will help boost the fragile economic recovery and kickstart the job market.
"We have drawn up a budget, well considering boosting economic growth and employment as well as fiscal discipline," Noda told reporters following a regular Cabinet meeting.
Japan's finance minister added that the government has succeeded in capping its main spending at 71 trillion yen (855.40 billion U.S. dollars) and keeping new debt issuance below 44.3 trillion yen (533.72 billion U.S. dollars) in its planned budget for the next fiscal year starting April.
"We've been able to clear those goals," Noda told reporters.
A divided parliament could hamper the smooth passage of the budget, which covers the financial year starting April, due to the dominance of opposition parties in the House of Councilors following Naoto Kan's ruling coalition's defeat in this summer's upper house election.
The ruling Democratic Party of Japan (DPJ) can ensure the budget passes through parliament with their majority in the more powerful lower house, due to a rule that allows it to become law after 30 days, even if the opposition-controlled upper house votes it down.
However, for the budget to be fully enacted from the start of the next fiscal year on April 1, the government needs the so- called "enabling bills," such as one on issuing deficit-financing bonds, which necessitates the approval of both houses of parliament.
From the budget, 54 trillion yen (650.6 billion U.S. dollars) has been earmarked to finance key policies, including raising monthly child allowances as well as an increase in grants to local authorities. A large proportion has also been allocated for interest payments and other debt-servicing costs to be incurred.
The government projects around 41 trillion yen (494 billion U.S. dollars) in tax revenues for fiscal 2011, an amount that is higher than that for fiscal 2010 partly due to a recovery in corporate earnings, but still remains at low levels compared with past records.
Economists highlight the fact that Japan's tax revenues are rising to levels approximating 41 trillion yen (494 billion U.S. dollars), falling short of new debt issuance for a second straight year, despite an increase of about 4 trillion yen (48.2 billion U.S. dollars) compared with this year's initial budget figure.
"The fact that new bond issuance exceeds tax revenues is not at all normal. We need to rectify this as soon as possible," Economics Minister Banri Kaieda told reporters Friday.
To balance the books the government is expected to raise some 7 trillion yen (48.2 billion U.S. dollars) of non-tax revenues, the bulk of it by further dipping-into cash reserves from its special accounts and administrative agencies.
Kan took office in June, promising to slash spending and work towards cutting Japan's massive public debt, which accounts for nearly 200 percent of gross domestic product (GDP) and is the largest in the industrialized world.
Source: Xinhua