Budget guideline adopted

The government has adopted the fiscal 2010 budgetary request guideline, setting a record-high cap on general expenditures. General spending will climb to ¥52.67 trillion, an ¥940 billion increase over the ¥51.73 trillion initially budgeted for fiscal 2009 — when the ¥50 trillion mark was topped for the first time. The most remarkable feature of the guideline is that the policy of curbing automatic growth in social security spending by ¥220 billion a year from fiscal 2007 through fiscal 2011 has been dropped. That policy was introduced by the Koizumi administration to push financial reconstruction.

Social security spending, including an automatic growth of ¥1.09 trillion, will reach ¥25.1 trillion, about half of general expenditures. In view of the deterioration of medical and nursing care services and welfare measures for the socially needy, the increase is unavoidable. Even so, the government as a whole appears to be rather lax in exercising fiscal discipline.

Under the guideline, public works spending will be cut by 3 percent and outlays for defense and universities will be trimmed by 1 percent. But the government will set aside ¥1 trillion as a special fund for emergency economic measures.

Out of this special fund, ¥350 billion, or ¥20 billion more than in fiscal 2009, will be allocated to priority projects aimed at alleviating problems such as doctor shortages, unemployment and local economic decline. Since the money can also be used for public works, though, the cap on public works spending will become almost meaningless. The money is apparently aimed at getting votes in the coming general elections.

In fiscal 2008, Japan's tax revenues fell 13.2 percent on the year — the steepest ever — to ¥44.26 trillion. As the economy is in bad shape, the government will have no choice but to rely on the issuance of a large amount of national bonds.

The total amount of long-term outstanding debt of the central and local governments is expected to reach ¥816 trillion by the end of March 2010. Both the ruling and opposition parties need to present an honest post-recovery plan on how to get the nation back on a healthy financial footing.