Japan's cabinet approves draft budget
Japan's Cabinet on Monday endorsed a draft 82.18 trillion yen ($788.7 billion) national budget for fiscal 2005, increasing overall spending to care for an aging population and to pay interest on government debt.
The plan trims defense and education spending, however, in an attempt to control deficit spending.
The Finance Ministry draft, which now goes back to ministries for review before a final Cabinet vote on Friday, also calls for a cut in new bond issuance to ease the country's snowballing national debt. The document is to be presented to Parliament in January.
The proposal, for the year starting April 1, charts a 0.1 percent increase in total spending, but cuts 0.7 percent from general account expenditures, which encompasses discretionary spending outside of debt servicing and other compulsory costs.
While departments from education and defense to public works and overseas aid face cuts, the social security allocation rose 2.9 percent, underscoring rising costs of supporting Japan's rapidly aging population.
Spending on social security, at 20.37 trillion yen ($195 billion), is by far the biggest single part of the national budget. It is followed by interest on the national debt, which will cost 5.0 percent more next year because of a rise in outstanding bond issues.
Defense spending will be cut for the third year in a row, this time by 1.0 percent to 4.86 trillion yen ($46.6 billion). The spending cuts come despite Japan's shift toward a more active international military stance.
Restraining non-social security spending should enable the government to trim the issuance of new government bonds to 34.39 trillion yen ($330 billion), down 2.2 trillion yen ($21.1 billion) from this fiscal year, officials said.
"We have maintained and strengthened our position to reform government spending," Finance Minister Sadakazu Tanigaki said in outlining the draft budget. "We were able to curb spending while shifting funds to key areas to compile an efficient budget."
Prime Minister Junichiro Koizumi said he was satisfied with the outcome.
"The budget draft turned out to be a good one," he said. "It generally follows our (reform) policy, although it still has to be fine-tuned."
Japan's deficit will stand at 15.95 trillion yen ($153.1 billion) in fiscal 2005, down 3.1 trillion yen ($29.7 billion) from the current fiscal year for the second straight year of improvement.
But this is still far from the government's goal of achieving a surplus ¡ª by which tax revenues exceed expenditures minus debt-servicing costs ¡ª in the early 2010s.
Japan's outstanding long-term debt will also rise to 1.51 times gross domestic product by March 2006, breaking Tokyo's own record for the highest debt burden in the industrialized world. The previous high, from this year, was 1.46 times GDP.
In an apparent effort to find new buyers for Japanese government debt, Finance Ministry officials will travel to London and New York next month. Currently, only 3 percent of outstanding Japanese government bonds are held by foreign investors, low by international standards.