Fiscal management must be shifted off its pandemic emergency footing

Editorial

13:05 JST, September 2, 2022

It is time to shift from emergency fiscal management in response to the novel coronavirus and return to a conventional budget compilation process that emphasizes fiscal discipline. The government as a whole needs to share this awareness.

The deadline for budget requests from each ministry and agency for fiscal 2023 has passed. The total amount requested was about ¥110 trillion, the second-largest ever, after the amount requested for fiscal 2022.

In response to the deteriorating security environment, the Defense Ministry requested a record ¥5.5947 trillion. The Health, Labor and Welfare Ministry asked for ¥33.2644 trillion, about 30% of the total, to deal with an increase in social security costs due to the aging population.

This time, ministries and agencies were given wide latitude to make budget requests without specifying yen figures for certain items relating to important measures. As a result, requests made in such an exceptional manner for areas including defense, decarbonization and measures to combat the low birth rate have increased significantly. These are not included in the amount requested.

Therefore, it is possible that the total budget proposal for fiscal 2023 could exceed the record initial budget for fiscal 2022, which was ¥107.6 trillion. It is essential to make efforts to rein in spending in the upcoming budget compilation process.

The nation’s finances are becoming tighter as the government deals with the coronavirus. Last fiscal year’s total expenditures, including the supplementary budget, reached ¥142 trillion. The government took in a record ¥67 trillion in tax revenue, but this was not enough to cover even half of the expenditures. Such a situation cannot be called sustainable.

Last fiscal year, as a result of lavish fiscal support for measures aimed at combating the infectious disease, the total amount that went unused reached a record high of ¥6.3 trillion. It is said to be around ¥1 trillion to ¥3 trillion in normal years.

This may be because the government compiled the budget by prioritizing the sheer scale of the budgetary framework in its rush to deal with the coronavirus pandemic.

Responding to emergencies swiftly and flexibly is important, and in some respects it is inevitable that these situations will arise. However, this does not mean that fiscal discipline can simply be thrown out the window. A worsening fiscal situation could intensify public anxiety about the future.

Currently, as pandemic-induced restrictions on activities have almost disappeared, economic activities are steadily returning to normal. Fiscal management should also be shifted to reflect awareness of this trend.

In the United States and Europe, there are moves to take measures to secure financial resources such as by raising corporate taxes and creating new environment-related taxes, as well as measures to promote investment for economic growth in areas including decarbonization and infrastructure.

Japan also needs to start discussing how to secure financial resources, through such measures as tax rate hikes, rather than relying too heavily on government bonds.

Of course, it is important to focus the budget on growth areas such as decarbonization and digitization. There is a need to scrutinize the budget so that unnecessary projects are not slipped into it, and take effective measures that lead to technological innovation and business creation.

(From The Yomiuri Shimbun, Sept. 2, 2022)