The FY2002 Government Budget Proposal and its Characteristics
Prime Minister Koizumi's Cabinet, to balance the national budget and undertake
structural reforms as top priority while addressing problems of a burgeoning
deficit and an aging population, announced the national budgetary proposal
for FY2002 on December 24, 2001. Total fiscal expenditure, at 81.23 trillion
yen, fell 1.7% from the previous fiscal year.
The government, which only just kept its campaign promise of limiting government bond issues to under 30 trillion yen, announced the first budgetary proposal in four years to curtail spending, despite vocal opposition claiming that economic stimulus designed to halt the recession is more important than reform at this stage.
The new budget makes it clear that the government's objective lies in reducing
the deficit: it cut public works spending (which no longer seems to be
boosting the economy) by 10%, cut ODA spending by 10%, consolidated specific
transportation-related revenue (which could only be used on roads) into
the general revenue structure, reduced government expenditures to public
corporations by 1 trillion yen, and reduced government expenditures to
doctors and hospitals. In the labor sector, the government increased unemployment
benefits and reemployment and training subsidies and increased the social
security allocation by 3.8%, keeping their promise made last June regarding
allocation of government spending in seven strategic sectors (see JIL Labor Flash Vol. 3).
On the other hand, critics point out that the new budget merely makes small cuts in overall spending and uses minor budget allocation changes as window dressing. They say that the new budget does not go far enough in reviewing government spending and is not assertive enough in its commitment to structural reform and economic recovery.
Even with the new budget, spending exceeds income from taxes and other revenue sources by approximately 13 trillion yen, with the rest covered by the issuing of government bonds. This primary balance is only slightly better than the previous year. It still appears that the road to full economic recovery will be long and difficult.
Highlights of the Budget for FY2002
http://www.mof.go.jp/english/budget/e011221.pdf
