The Noda Cabinet a week ago endorsed the fiscal 2012 budget to be submitted to the Diet. The general account spending will drop 2.2 percent from the fiscal 2011 initial budget to 90.33 trillion yen ― the first fall in six years.
Spending for social welfare will fall 8.1 percent to 26.39 trillion yen. That for public works, defense and education/science will fall, respectively, 8.1 percent to 4.57 trillion yen, 1.3 percent to 4.71 trillion yen and 1.9 percent to 5.40 trillion yen.
But one should not be misled. Spending in real terms will top 96 trillion yen ― a record high ― because the government will include 3.77 trillion yen for reconstruction from the March 11 disasters in a special account budget and issue 2.6 trillion yen pension-related special bonds not appearing in the general account budget.
Clearly the government has failed to prioritize budget items, thus failing to maintain financial discipline.
Tax revenues will amount to 42.34 trillion yen, up 3.5 percent from fiscal 2011, and bonds worth 44.24 trillion yen will be issued (excluding the pension-related special bonds), down 0.1 percent. But revenues from bonds issuance will exceed tax revenues for three consecutive years and will account for 49 percent of the revenues in the general account budget ― the worst in terms of reliance on debts.
In fiscal 2009, the government started shouldering 50 percent of basic pension benefits, up from the previous 36.5 percent. Surpluses in special account budgets were mainly used to pay for the payments. Since such surpluses have been almost used up, the government has come up with a risky trick of issuing 2.6 trillion yen in special bonds, which must be monetized with revenues from a raise in the consumption tax.
As long as the tax is not raised, part of some 120 trillion yen pension reserves will be broken into ― an act that will weaken the funding for the nation’s pension system. The government should realize that ad hoc measures to make the budget work have reached their limit.
Despite the Fukushima nuclear crisis, the government will decrease nuclear power-related mainstay spending only 1.1 percent to some 418 billion yen. This is nearly double the spending of some 210 billion yen (including fiscal 2011 extra spending) related to renewable energy sources. The Noda administration’s moves on nuclear energy must be strictly watched. The Diet also must scrutinize each budget item to avoid wasteful use of public money.
( The Japan Times )
