Risky for Japan to increase expenditures that rely on debt in FY21 budget plan
THE Japanese government must carefully examine how funds should be used effectively, to curb the expansion of the budget while taking every possible measure to prevent the spread of the infectious disease.
The government has adopted its fiscal 2021 budget plan, calling for a record ¥106.6 trillion ($1.03 trillion) in total general account spending, an increase of about ¥4 trillion from the initial budget for fiscal 2020.
The increase is said to have come as the government earmarked ¥5 trillion as a reserve fund to deal with the coronavirus pandemic. The budget plan also includes funds to strengthen systems for public health centers and research on infectious diseases.
As the number of newly infected patients and people with serious symptoms continues to increase, expense should not be spared in supporting the medical system.
The promotion of digitisation and decarbonisation to reduce greenhouse gas emissions are also important issues.
With the aim of creating a digital agency, as the Cabinet of Prime Minister Yoshihide Suga has pledged to do, the
government has earmarked a total of about ¥300 billion across different ministries and agencies for the development of information systems at related bodies. As for environmental measures, steps were expanded to support the use of hydrogen as fuel, among other actions.
Expenditures in growth areas that encourage companies to invest in them are important.
The question is how to streamline other expenditures.
Spending for social security – such as pension, medical and
nursing care services – which accounts for one-third of expenditures, totaled ¥35.8 trillion, a slight increase from the initial budget for fiscal 2020.
The government is said to have limited the automatic growth in social security costs due to the aging of the population to ¥350 billion by saving about ¥100 billion through such measures as cutting official drug prices for many items.
However, the pace of increase in social security spending is expected to accelerate in 2022, when the baby-boom genera
tion will begin to turn at least 75 years old. A certain conclusion on raising the out-ofpocket burden of medical costs on elderly people has been reached. It is hoped that discussions will further continue on social security system reform, to strike a more appropriate balance between benefits and burdens.
Public works spending remained almost unchanged at ¥6.1 trillion. But as more than ¥2 trillion was included as money to strengthen the nation’s resilience to disasters in the third supplementary budget for fiscal 2020, total public works spending is on the increase.
Although it is vital to deal with frequent floods, the government should not allow nonessential, nonurgent projects to be slipped into public works expenditures. It is hoped that the priorities for public works spending will be thoroughly examined in the Diet deliberations.
The fiscal 2020 budget finally ballooned to about ¥176 trillion from the initial budget of about ¥103 trillion through three supplementary budgets. The issuance of new government bonds reached an unprecedented total of ¥112.6 trillion. In fiscal 2021, when tax revenues are expected to decline, the government also plans to issue ¥43.6 trillion in new government bonds, up about 30 per cent from the initial budget for fiscal 2020.
If the coronavirus pandemic is prolonged, pressure to make additional fiscal expenditures could intensify. It is necessary to be cautious about a situation in which an indulgent assessment of a supplementary budget could lead to an increase in the budget. The government should keep in mind that increasing expenditures that are dependent on debt is not sustainable.