24 December 2002, 08:47  Japan's Cabinet Endorses 81.8 Tln Yen Budget Proposal

/www.bloomberg.com/ By Mayumi Otsuma, with reporting by Yoshimasa Yamaguchi and Yoshiko Matsushita
Tokyo, Dec. 24 (Bloomberg) -- Japan's Cabinet endorsed an 81.8 trillion yen ($679 billion) budget for next year that some industry leaders and members of Prime Minister Junichiro Koizumi's party say will fail to boost growth or add jobs.
The budget, which increases spending on medical and welfare programs, is 0.7 percent more than the outlays in the current fiscal year, which ends March 31, 2003. It includes Koizumi's efforts to contain Japan's public debt, the world's biggest, by cutting public works spending.
The budget's meager increase drew criticism from within the ranks of the ruling party for being too small. Analysts also said it demonstrates the Koizumi Cabinet's lack of decisiveness, coming a month after it broke a pledge to cap bond sales in order to increase spending to spur the economy.
``This budget shows that there is no consistency in Koizumi's fiscal policy,'' said Mamoru Yamazaki, chief economist at Barclays Capital Japan Ltd. ``The current administration doesn't seem to have a clear sense of direction.''
The Cabinet was widely expected by analysts to approve the budget, details of which were released in draft form on Friday.
Japan's benchmark Nikkei 225 rose 71.99, or 0.9 percent, to 8478.87 as of 1 p.m. in Tokyo, trimming a fall for the year to 20 percent. The yen was little changed at at 120.40 yen.
Construction Jobs
The budget proposal, which the government will submit to parliament next month, cuts public works investment for roads, bridges and dams by 3.7 percent to 8.91 trillion yen. That will probably reduce orders at Japan's three largest construction companies -- Kajima Corp., Taisei Corp., and Shimizu Corp.
Taisei Chairman Osamu Hirashima, who is also head of the Japan Federation of Construction Contractors, said on Friday that the public works spending cuts will eliminate jobs.
``There won't be any solutions unless the government expands public works investment,'' Hirashima said. ``We are afraid that as many as 200,000 jobs will be lost next year.''
The government last week forecast an increase in the jobless rate to a record average of 5.6 percent in the next fiscal year as the economy slows. Unemployment was 5.5 percent in October. It forecast annual economic growth of 0.6 percent, down from 0.9 percent this year.
The slump will reduce tax revenue by 10.7 percent from this year's initial target, to 41.8 trillion yen, the lowest since 1986. The shrinkage is the result of proposed tax cuts of 1.5 trillion yen and falling tax receipts from corporations.
Bond Sales
To plug the gap between revenue and spending, the government plans to sell 36.4 trillion yen in new bonds, a record target for the start of a fiscal year. Including bonds to refinance maturing debt and bonds issued by state companies, Japan will have to sell a record 141.4 trillion yen in debt next year.
Japanese Finance Minister Masajuro Shiokawa on Sunday defended the budget proposal from criticism that spending is too low, saying the government has little room to sell more debt.
New bond sales will drive up the country's public debt to 137.6 percent of annual gross domestic product by March 2004, the government forecast in the budget plan.
``There may be some calls that the government must provide more spending to stimulate the economy, but how can you dare call for it?'' Shiokawa said
Politics
General spending, which excludes debt payment costs and subsidies to local authorities, will reach 47.6 trillion yen, an increase of 0.1 percent for expected outlays this year.
The potential backlash from voters opposed to Koizumi's drive to tighten the national purse strings has caused members of his own Liberal Democratic Party to join the chorus of complaints.
``I think it's better to see Prime Minister Koizumi's support rate falling further so that he will wake up and consider reversing his policy course drastically,'' Shizuka Kamei, a former construction minister and former chief policy maker of Koizumi's party, said in a speech last week.
Support for Koizumi's Cabinet fell 10 percentage points to 51 percent from October, according to a poll last week in the Nihon Keizai newspaper. About 69 percent of people surveyed said they were ``dissatisfied'' or ``somewhat dissatisfied'' with the government's economic management.

© 1999-2024 Forex EuroClub
All rights reserved