Budget Keeps on Swelling

Fumio Kishida administration made on Friday a Cabinet decision on the budget bill for FY 2024, which spendings amounted ¥112.7 trillion. Although it was reduced from the previous bill for FY 2023, the bill marked the second largest ever, lacking necessary efforts to reduce governmental spendings. FY 2024 bill does not have sufficient effect to reduce the huge amount of deficit. The bill will not be making a momentum to revitalize Kishida administration, which is suffering from the slush fund scandals in Liberal Democratic Party.

A report of governmental council, Basic Policy of Economic and Fiscal Management and Reform 2023, recommended Kishida administration to get rid of emergency budgetary posture brought by the infections of COVID-19. Receiving that requirement, the FY 2024 budget bill reduced “reserve” by ¥4 trillion, which caused reduction of total amount of the spendings for the first time since FY 2012. Reserve, one of the symbols of emergency budget, has been criticized as the spending without approval from the Diet.

 

One third of all the spendings is directed to social security. The total amount of social security spendings is ¥37.7 trillion, marking the record high. Kishida upheld his policy for “different-dimensioned” measures for dealing with low birth rate earlier this year. To implement it, the government will start ¥3.6 trillion of annual spendings from FY 2024. But the spendings for the first year is limited to ¥800 billion, because the allowance for the children will start next December. A significant part of the spendings for low birth rate will be appropriated by issuance of governmental bonds.

 

The government decided to raise the reward for medical service by 0.88% in FY 2024. While Ministry of Finance protested expanding medical spendings, Ministry of Health Labor and Welfare, backed by medical pressure groups, insisted on the higher growth. Kishida finally leaned on the side of MHLW, taking the measure as one of the policies for wage increase.

 

Cutting spendings has been a basic policy for Kishida administration to secure fiscal resource for his own policies. Although Kishida decided last year to spend ¥43 trillion for defense between FY 2023 and 2028, he gave up tax increase for it in FY 2024. The total amount of defense spendings in FY 2024 bill is ¥7.9 trillion, smaller than the previous year. But considering multi-year spendings, which was included in last year’s budget, the defense spendings can be said as increasing.

 

The spendings on reimbursement for governmental bonds increased by ¥1.7 trillion, reaching to ¥27 trillion. The government raised the estimated interest for governmental bonds from 1.1% to 1.9% in FY 2024. The payment for the interest hike will be increasing by ¥1.2 trillion. It is supposed that Bank of Japan is seeking the exit of extreme monetary easing and the interest for the governmental bonds will be further increasing. Having ¥1,000 trillion of deficit for governmental bonds in the balance, the government has to be independent on issuing bonds as soon as possible.