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JapanNews/2018/7/11 22:10

Govt must thoroughly scrutinize policy effects of budget requests

The Yomiuri ShimbunTo strike a balance between economic revitalization and fiscal reconstruction, policy effects need to be adequately scrutinized from the stage when budgetary requests are made.
The government has decided on budget request guidelines that will serve as the general framework of the fiscal 2019 budget.
The budget requests to be made this time are likely to be packed with elements that would inflate spending.
With no ceiling set on overall spending, budget requests are certain to top ¥100 trillion for the fifth straight year.
As Japan has the worst fiscal situation of any advanced nation, the Finance Ministry must examine budgetary requests more strictly.
A special quota that will give priority to budget allocations for growth fields, such as improving productivity and investment in human resources, has been set in the range of ¥4.4 trillion, up about 10 percent from the previous year.
It is understandable that the special quota is aimed at making flexible use of the budget, which has become rigid. But there has been a tendency in the past for various budget requests to be made on the pretext of growth strategy, despite being only remotely related to be included in the special quota.
Ahead of the House of Councillors election set for next year, the ruling parties are highly likely to heighten pressure to increase spending. Individual government ministries and agencies should thoroughly scrutinize their budget requests to see whether they will truly contribute to economic revitalization.
Another major challenge is how to curb the increase in social security spending, which accounts for one-third of the total expenditures.
The guidelines allow for a total increase in requests of ¥600 billion as a natural rise caused by the aging of the population.

Practical road map is key
The government achieved its goal of capping the year-on-year increase in social security spending at ¥500 billion for three years from fiscal 2016 through 2018, but it has not set a numerical goal for the fiscal 2019 budget. It seems to be hard to curb the increase in welfare spending.

It is essential to improve the efficiency of medical and nursing care services through such measures as promoting the use of lower-priced generic drugs.
The consumption tax is scheduled to be raised to 10 percent in October 2019. The government said it will study budgetary steps to prevent a drop in consumption following the tax increase separately from the budget request guidelines through the end of this year.
Financial assistance for the purchase of housing units and automobiles are expected. It is essential to discontinue the pork-barreling of budgets and narrow down a list of effective measures to encourage consumer spending.
The government has set a goal of bringing the primary balance into the black in fiscal 2025. But it will be extremely hard to achieve this goal.
According to a new forecast released by the Cabinet Office, a deficit of ¥2.4 trillion will remain in the primary balance for fiscal 2025 even if a high nominal growth rate of about 3 percent continues until then.
According to a realistic forecast that envisions the growth rate at about 2 percent, the primary balance will suffer a deficit of a whopping ¥8.1 trillion in fiscal 2025.
In June this year, the government worked out a new plan to achieve fiscal soundness. But it stops short of presenting adequate measures.
The government should rework the road map into a more specific shape that envisions a path to reducing the national debt of more than ¥1 quadrillion.




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