TOKYO (AFX-ASIA) - An advisory panel for Finance Minister Masajuro Shiokawa said the budget for the year to March 2004 should not increase as a percentage of GDP beyond the current fiscal year. The Financial System Council added that administrative cost cuts cannot be used to fund future tax cuts or increased spending without hurting government finances.
The council estimates the gap between tax revenue and spending will expand to 40 trln yen in the year to March 2006, compared with 30 trln yen currently. Prime Minister Junichiro Koizumi has said issuance of new government bonds to fund this gap should not exceed 30 trln yen. "The government needs to continue its reform efforts. The government should contain growth of general expenditures in compiling next year's budget," the panel said in a statement. "Simultaneously, the government should restrain new issuance of government bonds to a level not larger than the 30 trln yen bond cap," it said. The council said a supplementary budget to stimulate the economy would have a major negative effect on the government's policy to keep budget discipline and increase the efficiency of spending. "Given current fiscal conditions, characterised by a huge deficit, the government should not take the view that administrative cost cuts should be used to finance lower future taxes because it will hurt the government's finances."