Swollen Budget Decided

Shinzo Abe Cabinet decided the draft of governmental budget for fiscal year 2018 on Friday. Total amount of the general account budget rose up to ¥97.7 trillion, increased by 0.3% from the previous year, renewing the highest record for six consecutive years. While the budget expects the greatest tax income in these 27 years, one third of the whole revenue depends on newly issued governmental bond. Abe administration literally abandoned the target of balancing governmental budget by 2020.

Budget for social security occupies about 30% of whole expenditure. Although Abe administration limited the growth within ¥500 billion, which was a benchmark for fiscal reconstruction, total spending for social security amounted to ¥32.9 trillion, marking a new record. Increase in the reward for medical treatment, receiving pressure from the group of medical doctors, caused insufficient cut in the spending.

Prime Minister Abe promotes the policy dealing with low birth rate. To encourage mothers giving birth, ¥33 billion was distributed as the financial resource for nursery school for free. Receiving frustration of mothers waiting for the room to leave their children, ¥86.5 billion was saved for creating new 65,000 slots for nursery school. For higher education, ¥106.3 billion was accumulated for scholarship without duty of repayment.

To stress the necessity for dealing with threat of North Korea, Abe administration increased defense budget by ¥66 billion and the budget amounted to ¥5.19 trillion, renewing the record for four consecutive years. The administration appropriated ¥3.5 billion for new missile defense system named Aegis Ashore, the ground-based anti-ballistic missile defense system.

Japanese Self-defense Force will obtain long-range cruising missile on fighter jets with cost of ¥2.2 billion, inviting criticism of violating the principle of strictly defensive military policy. Having accepted business offer from President Donald Trump, ¥410 billion would be spent for foreign military sales of US Department of Defense, which included purchase of F-35 Lightning II.

Looking into the revenue side, tax income was expected to rise up to ¥59.7 trillion, the same as FY 1991 in the middle of bubble economy. As Japanese economy is basically supported by extraordinary monetary easing policy by Bank of Japan, tax income of the government is supported by the bills the government is printing. Governmental bond is mostly bought by BoJ. So it can be said that the swollen budget is not supported by substantial economic growth in Japan.