EDITORIAL: Japan Should Stop Using Supplementary Estimates For Unlimited Spending
The government’s gratuitous use of supplementary budgets guarantees the failure of its plan to remedy its budgetary problems even if it manages to show the initial budgets capable of achieving fiscal health.
Cabinet recently approved budget request guidelines for the initial fiscal year 2022 budget. The administration has chosen the four priority areas of carbon reduction, digitization, local development and fertility growth.
If each ministry and agency cuts its budget request for existing programs by 10%, they are allowed to request amounts three times the reductions for those four areas.
The novel coronavirus pandemic is causing significant social and economic changes. This is forcing the government to rethink its political priorities and take on new challenges.
But Japan is facing a capital budget crisis. The government needs to make clear cuts in budget spending in low priority areas to secure funds for high priority policies.
Baby boomers start turning 75 or older in the next fiscal year, which means even faster growth in Social Security spending. The government must take all possible measures to curb this growth as much as possible, in particular by revising the remuneration of medical treatments under the public health insurance plan and by promoting the use of cheaper generic drugs.
Regarding the initial budget, the basic government policies for economic and fiscal management and reform, known as “honebuto no hoshin” (grand policy outline), call for sustaining the growth of security spending. social in the natural increase due to the aging of the population and by maintaining the other general expenses at the same level as those of the previous year.
It is customary for the government to formulate an original budget in compliance with these rules to at least claim to engage in budgetary discipline.
The problem is that there are no such rules for supplementary estimates which have often been abused as a loophole to increase spending.
The day after Cabinet approved the guidelines for the budget request, Toshihiro Nikai, general secretary of the ruling Liberal Democratic Party, said: “We need to consider (compiling a supplementary budget worth ) of nearly 30 trillion yen ($ 272.93 billion).
As the pandemic has lasted well over a year and is clearly here to stay a bit longer, compiling supplementary budgets is a key policy challenge. Ensuring sufficient funds are essential to support medical facilities, restaurants and bars, non-regular workers and others grappling with the effects of the health crisis.
But the amount of spending should be based on a list of specific policy measures.
The public finance law limits the purpose of drawing up an additional budget to responding to unexpected situations such as natural disasters. In fact, however, expenses for certain policy initiatives, such as programs to better prepare the nation for major natural disasters and measures to deal with the impacts of the Trans-Pacific Partnership Multilateral Trade Agreement, have been paid annually to from supplementary budgets.
Supplementary budgets have been extended to multibillion yen spending plans under the pretext of reviving the economy. But the expenditures of these budgets have not been scrutinized or evaluated rigorously.
Last year, Japanese consumers were effectively forced to save some 20 trillion yen in total as the pandemic restricted their shopping activities, according to the Bank of Japan. Once the virus is under control, consumer spending will rebound on its own.
Even if the government decides to take additional policy measures to fuel demand, it should carefully assess the appropriate scale of spending.
The government’s tax revenue for the last fiscal year exceeded its estimate by around 5.7 trillion yen due to a stronger than expected recovery in export industries and other factors. But that’s no reason for decision-makers to become complacent.
The government issued more than 100,000 billion yen in new bonds in the past fiscal year. The administration and ruling parties should keep in mind that there is no room for wasted taxpayer money wooing voters ahead of the next lower house election.
–L’Asahi Shimbun, July 17