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How can the state budget, which has ballooned as a result of the COVID-19 pandemic, be reduced? This year’s budget request ceilings suggest awareness about the issue is lacking.
Concerns that fiscal spending will continue to balloon without limit in fiscal 2024 cannot be dismissed.
The government has announced budget request ceilings that will serve as the general framework for the fiscal 2024 budgetary requests of each ministry and agency. By the end of August, ministries and agencies will submit their requests in accordance with the ceilings, and budget compilation will begin in earnest.
Requested expenditures for policy implementation, such as public works projects, which are determined at the discretion of each ministry and agency, will be reduced uniformly by 10% from the initial budget for fiscal 2023.
However, ministries and agencies are allowed to submit so-called item requests without specifying the amount for measures to address the declining birth rate, which Prime Minister Fumio Kishida views as a key policy, and high prices, which directly affect people’s livelihoods.
Item requests were originally intended as special cases when the content or scale of measures cannot be foreseen. In recent years, however, the government has widened the scope of item requests — a trend that has been spurred by budgets for COVID-19 pandemic measures.
Such an approach, which could make spending requests effectively limitless, should be curbed.
Caps on each ministry’s and agency’s budget requests were originally intended to prevent budget expansion. At the present time, it must be said that this concept has been reduced to a mere formality.
This time, a special quota has also been set aside for budgets related to the prime minister’s “new form of capitalism” policy, with requests totaling about ¥4.2 trillion permitted. This quota covers measures to realize structural wage increases through worker retraining and to promote investments in the decarbonization sector through public-private cooperation, among other efforts.
However, it has long been argued that such special quotas lead to the inclusion of nonessential and nonurgent items. Existing projects are repurposed to fit signature measures in a conspicuous number of cases. Each ministry and agency must scrutinize the content of their requests.
The size of the state budget expanded rapidly amid the COVID-19 pandemic, with the fiscal 2023 initial budget topping ¥110 trillion for the first time when it totaled ¥114 trillion — an increase of more than ¥10 trillion compared to fiscal 2019, before the pandemic.
A number of large-scale supplementary budgets have been compiled, and the balance of the national debt, including government bonds, has increased sharply, reaching about ¥1.27 quadrillion at the end of fiscal 2022.
Economic activities have now largely normalized. It is obvious that the government should swiftly end emergency fiscal management measures.
In its Basic Policy on Economic and Fiscal Management and Reform, the government stated in June that fiscal spending would return to a normal footing. However, it is unclear what comprises a normal budget level, and the government has not presented specific measures on how it will be achieved.
In a critical financial situation, public anxieties about the future will only increase if there is no road map for restoring fiscal health.
