Japan’s 2010 Budget Requests Rise to Record 95 Trillion Yen

By Keiko Ujikane

Oct. 16 (Bloomberg) -- Japan’s ministries and agencies asked to spend a record 95.04 trillion yen ($1.04 trillion) next fiscal year, Vice Finance Minister Yoshihiko Noda said.

The requests are 7.4 percent higher than this year’s initial budget of 88.5 trillion yen, according to a statement released by the Finance Ministry in Tokyo today. The previous record request was 89 trillion yen in fiscal 2004.

The increase suggests it may be hard for the Democratic Party of Japan to fulfill its election pledges without worsening a public debt that is already the world’s largest. Prime Minister Yukio Hatoyama had asked ministers to keep their requests below the current year’s appropriation.

“The figure shows it’s easy to spend but it’s tough to cut back,” said Hiroaki Muto, a senior economist at Sumitomo Mitsui Asset Management Co. in Tokyo. “If this goes on, the DPJ may become perceived to be a regime with a lax fiscal policy.”

The DPJ, which won power in August, has pledged to pay for its promises by cutting what it terms wasteful spending, shrinking the public service and tapping money from special accounts managed by bureaucrats. The party has said it needs to find 7.1 trillion yen next fiscal year to fund pledges ranging from handouts for childcare to lowering school tuition costs.

The former administration led by the Liberal Democratic Party’s Taro Aso said in August that its budget requests for next year would total 92.1 trillion yen, including 52.7 trillion yen in general expenditure, a ceiling that Aso’s Cabinet set in July.

Abandoned Ceiling

The DPJ-led government abandoned the ceiling and asked ministries to review their budget requests. The government plans to compile next year’s budget by the end of December.

Economists and investors have questioned whether the DPJ’s funding plan is realistic, given tax revenue is falling and welfare costs are increasing as the population ages.

“The budget request figure is disappointing as people expected the DPJ would drastically cut wasteful spending,” said Susumu Kato, chief economist at Calyon Securities in Tokyo. “There will be little choice but to sell more bonds,” especially when tax revenue is falling, he said.

Hatoyama said on Oct. 14 that the government may need to consider issuing more bonds as it assesses a possible decline in tax revenue. Finance Minister Hirohisa Fujii has said Japan should try to keep debt sales below this year’s record 44.1 trillion yen.

Tax receipts for next fiscal year may fall below 40 trillion yen, the Mainichi newspaper said on Oct. 6, without citing anyone. Tax revenue for the current year may fall short by about 6 trillion yen from the government’s estimate of 46 trillion yen because of worsening corporate profits, the paper said.

To contact the reporter on this story: Keiko Ujikane in Tokyo at kujikane@bloomberg.net