In light of the nation's dire fiscal situation, it is imperative to stave off the expansion of government spending.
The submission of budgetary requests by government ministries and agencies for fiscal 2019 has been closed. The total amount exceeded 100 trillion yen for the fifth consecutive year.
The Finance Ministry should thoroughly examine the cost-effectiveness of policy measures and narrow them down to work out truly necessary budget items.
As usual, the government has set a "special quota" to focus budget allocations on areas of growth including improvement of productivity and investment in human resources. The amount of the quota has been set at about 4.4 trillion yen, up 10 percent from the previous year.
It is reasonable for the government to aim at making priorities for the budget, which has become rigid.
Conventional measures are often sneaked into the special quota under the pretense of growth strategy measures. It is essential to intensely scrutinize whether the measures are in line with the original purposes of the quota.
Regarding social security spending, which accounts for one-third of total expenditures, the government expects a natural increase of 600 billion yen due to the aging of the population. From fiscal 2016 to fiscal 2018, the government achieved a goal of reducing this amount to 500 billion yen a year, but has not set such a numerical target for fiscal 2019.
As there will be no major changes to the social security system, such as a revision of medical treatment fees, which could help curb the budgets significantly, how to prevent an increase in spending is a challenge. There seems to be no option but to continue making steady efforts such as promoting the use of low-priced generic drugs.
In the future, a drastic reform of the system will be needed by asking affluent elderly people to shoulder heavier burdens, among other steps.
Show way to primary surplus
In the wake of recent disasters including heavy rain in western Japan, the Land, Infrastructure, Transport and Tourism Ministry has requested about 530 billion yen for flood control measures, up 33 percent from the previous year. The Education, Culture, Sports, Science and Technology Ministry has made more budgetary requests for such purposes as installing air conditioners at public schools and renovating dangerous concrete block walls.
The highly urgent "budget to protect people's lives" should be well secured while giving consideration to its effectiveness.
In response to a hike in the consumption tax rate, which is scheduled for October 2019, the government plans to consider economic stimulus measures separately from budgetary requests.
To prevent a downturn in consumer spending, the government envisages measures such as supporting purchases of housing and automobiles.
With a House of Councillors election slated for 2019, pressure from the ruling parties to spend more is likely to increase. There have been already calls for the government to implement measures worth several trillion yen. It is crucial to exclude mere lavish budget spending and limit funding to measures that can help buoy consumer spending after the consumption tax rate hike.
The government's debt has continued to expand, topping 1 quadrillion yen.
The government has set a goal of achieving a primary balance surplus in fiscal 2025, but no prospects of meeting the target are in sight. If the nation's economic growth rate is presumed to be about 2 percent, the nation is estimated to face a deficit of 8.1 trillion yen in fiscal 2025.
What should be done to turn around the nation's critical fiscal situation? The government should draw a realistic road map that will set a path to improve the situation.
(From The Yomiuri Shimbun, Sept. 1, 2018)
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