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It must be said that the government has inflated budgetary spending by prioritizing its scale without fully examining the effects on policy. Funds should be used especially for measures that enhance Japan’s growth potential.
The government has approved a package of economic measures to deal with high prices and for other purposes at a Cabinet meeting. The supplementary budget proposal for fiscal 2024 to implement the package calls for about ¥13.9 trillion to be spent from the general account, up from ¥13.1 trillion in the fiscal 2023 supplementary budget.
The scale of the economic measures, including private-sector spending, will total around ¥39 trillion.
The Japanese economy is at a critical juncture in the shift toward becoming a growth-oriented economy, in which both wages and investment increase. Funds need to be used strategically.
With the fallout of the COVID-19 pandemic having faded and the economy continuing its gradual recovery, the government itself in June last year decided on a policy to “return the expenditure structure to normalcy” in order to achieve both economic growth and fiscal consolidation.
Nevertheless, the size of the supplementary budget proposal has increased largely because Prime Minister Shigeru Ishiba mentioned during campaigning in the recent House of Representatives election that the size of the budget proposal would be larger than the previous fiscal year, without considering its content.
As a result, the supplementary budget proposal has become a lavish handout-type budget, with priority placed on budget scale from the start, rather than a careful examination and accumulation of necessary measures.
A typical example of a measure that has continued out of habit, with little impact commensurate with the huge cost, would be the ¥30,000 in benefits for each household exempt from residential taxation. Since the outbreak of the pandemic, such benefits have been issued repeatedly, and last autumn’s economic measures also included ¥70,000 in benefits for each such household.
Most households exempt from residential taxation are those whose members are aged 65 or older, which means that benefits are extended to the elderly with large financial assets. There are instead persistent calls for more generous support to be provided to the working-age generations.
It is also problematic that the subsidy system for electricity and gas bills will be resumed from January to March next year and that gasoline subsidies, which had been set to expire by the end of the year, will be extended.
A budget totaling over ¥11 trillion has already been allocated for these subsidy programs. Not only will this put pressure on the nation’s fiscal condition, it also runs counter to the trend toward decarbonization.
In order to overcome high prices and strengthen the Japanese economy, it is important to make use of the funds for key areas such as decarbonization, digitalization and labor-saving efforts to solve labor shortages.
The government intends to provide more than ¥10 trillion in support for the artificial intelligence and semiconductor sectors by fiscal 2030. It is hoped that the financial support will be steadily provided while carefully considering the risks.
The economic measures also include a review of the “¥1.03 million barrier” — the ¥1.03 million annual income threshold for the imposition of income tax. It is hoped that an appropriate review will be considered, taking into account the balance between the advantages, such as the easing of labor shortages, and the measures needed to secure financial resources to compensate for a decrease in tax revenues.
