The government prioritized areas relating to realizing a society in which all citizens can be dynamically engaged, which is expected to boost the national economy, in the budget plan for fiscal 2017 that was adopted Thursday at a Cabinet meeting.
It put the inevitable increase in social security spending due to the aging population at around ¥500 billion.
However, the budget plan showed clear signs that the effects of a tax revenue increase have reached a ceiling due to the economic recovery brought about by Abenomics initiatives. This makes it difficult to realize both economic vitalization and fiscal reconstruction at the same time.
To vitalize the nation’s economy, the government increased the budget for promoting science and technology by 0.9 percent from the previous fiscal year to ¥1.3045 trillion. The public and private sectors will jointly engage in research that will boost the growth of the Japanese economy.
As for public works spending, the government put priority on infrastructure construction, which is expected to serve as an impetus for private investment. It earmarked ¥200 billion for spending related to a “work style reform” that aims to increase the wages of non-regular employees. The government hopes to stimulate private consumption and investment in plants and equipment with this budget.
Regarding fiscal reconstruction, the rate of reliance on government bonds — which indicates the proportion of revenue covered by debts — showed a slight improvement from 35.6 percent in fiscal 2016 to 35.3 percent in fiscal 2017. The rate of reliance is the lowest since fiscal 2008, when it was at 30.5 percent, before the collapse of Lehman Brothers.
Even so, the conditions behind the budget plan are difficult. The government managed to decrease new government bond issuances compared to the previous fiscal year, but the decrease is only ¥62.2 billion. The decreases were ¥2.4 trillion in fiscal 2016 and ¥4.4 trillion in fiscal 2015, from the previous fiscal years. This is largely because the tax revenue increase resulting from the economic recovery has dropped sharply — from ¥3 trillion in fiscal 2016 to ¥108 billion in fiscal 2017.
“Elaborate budgeting maneuvers” intended to lead to a decrease in new bond issuances seem to have been done by transferring gains from the foreign exchange funds special account — which manages funds for foreign exchange intervention — into a general account with a larger amount than the other years, and padding out an account for “other revenues.”