Debt Expands in Supplementary Budget

The Fumio Kishida Cabinet made a decision that it would accumulate ¥13.1 trillion for the supplementary budget bill to deal with current rise of commodity prices. Although Prime Minister Kishida said he would return the surplus in the tax revenue to the people, about the two-thirds of the resource for the budget depends on issuing governmental bonds. Kishida is going to further expand the national debt, which already is on the highest level among the developed countries.

Kishida announced earlier this month that the government would return the tax to the people by tax cut and allowances. The supplementary budget includes ¥1.05 trillion for the allowance, which will be spent for distributing ¥70 thousand to each low-income family. The budget does not include tax cut, which will be appropriated by next fiscal year’s budget.

 

¥794 billion will be spent for subsidy on gasoline, electricity and gas supply. While the subsidy has been continuing along with Russian invasion to Ukraine, the government decided to extended it to next April. Saying “It’s economy, economy and economy” in the policy speech in the Diet last month, Kishida hopes the budget will raise his approval rate.

 

While Kishida insists on return of tax to the people, the budgetary surplus in the past earned by the increase of tax revenue has already been spent. The revenue for the supplementary budget will need to depend on newly-issued governmental bonds that amounts to ¥8.8 trillion. The total amount of issuance of the bonds in FY 2023 will be ¥44.5 trillion. 

 

The government issued ¥112 trillion of governmental bonds in FY 2020 to deal with COVID-19. Although it was reduced in FY 2021 and 2022, but it remained on a high level of around ¥60 trillion for each year. Once the government issue bonds, it will have to refund them with interest. The interest of governmental bond is affected by the long-term bond market. The Bank of Japan has decided to allow the interest of long-term bond beyond 1%. The interest of newly-issued governmental bonds is expected to rise, putting negative impact on future national budget.

 

¥3.4 trillion of the revenue in the supplementary budget will be filled with the budgetary reserve of FY 2022. But certain amount of the reserve legally has to be appropriated to reimburse for past governmental bonds and to fund for local governments’ needs. Rest of the reserve of FY 2022 will mostly be used for defense budget. The government can expect only a part of the reserve for economic measures.

 

The government accumulated ¥4.3 trillion for the funds for developing semiconductor business, the space strategy or other investments. Those funds are regarded as easy money, because the government can use it without approval of the Diet. It will invite firm criticisms from the opposition parties in the discussion of the Diet.

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