Despite Japan being a staggering quadrillion yen-plus (over $9 trillion) in debt, total government ministry and agency budget requests for fiscal 2018 have soared once more to nearly twice tax revenue. We are amazed at the apparent absence of any sense of crisis this represents.
Aug. 31 was the deadline for fiscal 2018 budget requests, with the estimated grand total to cover ministries' and agencies' wish lists hitting 101 trillion yen (about $917.8 billion) -- the fourth year in a row requests have topped the 100 trillion yen mark. The government should take the opportunity of the next four months before the budget is finalized to embark on real spending reform.
Prime Minister Shinzo Abe's plan to rehabilitate Japan's finances has always depended on swelling tax revenues from a rejuvenated economy. However, in fiscal 2016 tax revenue actually fell for the first time in seven years, leaving the government little choice but to issue more debt to cover the deficit.
This has made it all the more important to get a handle on national expenditures. And yet, what we see in the numbers unveiled on Aug. 31 is just more of the same expanding budget demands of previous years, on the pretext of financing the government's flagship policies, among other causes.
Symbolic of this practice is the 4 trillion yen ($36.4 billion) special account requested for the Abe administration's much ballyhooed "human resources development revolution" policy. The money is intended to support mid-career retraining and other human resource cultivation initiatives being proposed by multiple ministries and agencies. The goal is significantly improved productivity, but there is a real risk that the policy will result in nothing more than retreads of current businesses.
What's more, the government has requested funds for making education free -- a centerpiece of the "human resources development revolution" -- without actually providing a cost estimate. It is thought that covering preschool education alone will clock in at over 1 trillion yen, and there is as yet no source of funds marked to pay for this, raising the risk that Japan will simply end up piling on yet more debt.
Meanwhile, the Ministry of Land, Infrastructure, Transport and Tourism has asked for more than 6 trillion yen ($54.5 billion) for public works projects -- a nine-year high. The ministry has been crowing about plans to "make affluent and energetic local areas," but much of what we see in its budget request looks exactly like the humdrum road maintenance and other projects of the past. It is difficult to believe this will somehow halt or slow the depopulation of rural Japan.
Social security costs, too, continue their unrestrained march upwards. The Ministry of Health, Labor and Welfare has requested its largest budget ever, at over 31 trillion yen ($281.8 billion). The government sorely needs to shrink these outlays, through updates in medical and nursing care remuneration, among other measures.
Behind this overall lack of alarm over Japan's worsening financial state is the Bank of Japan's drastic monetary easing policy, which has dropped interest rates to historic lows.
The Ministry of Finance has slashed its interest payment estimate, cutting its request for debt service funds by almost 800 billion yen ($7.3 billion). Though tax revenue is not increasing, ministries, agencies and Diet bigwigs with ties to industry see this debt service drop as extra space to fund their own budgetary priorities, and they are applying not insignificant pressure to that end.
Even with that 800 billion yen drop from fiscal 2017, the finance ministry has still asked for some 23 trillion yen ($209 billion) to service Japan's debt -- still an enormous number by any standard. There is simply no room to loosen the leash on government outlays.
With Japan's financial resources as limited as they are, a drastic refocusing of budgetary allocation priorities is greatly needed.
In its budget request, the welfare ministry sought funding for creating new nursery schools to help eliminate the long waiting lists for spaces at child care facilities. The ministry ought to re-evaluate its current policy of lopsided support for the elderly and shift its energies to dealing head-on with Japan's low birthrate.