FY 2009 budget to hit record-high 88.55 tril. yen to fight downturn+

TOKYO, Dec. 19 Kyodo -
The Finance Ministry is set to propose Saturday a fiscal 2009 state budget
totaling a record-high 88.55 trillion yen to equip Japan with ample means to
battle against the sharp economic downturn, Finance Minister Shoichi Nakagawa
said Friday.
The general-account budget for the next fiscal year will far surpass the
previous record of 84.99 trillion yen in fiscal 2000 and exceeds the upper
spending limit of 86.13 trillion yen set in August, as the government decided
to create special reserves to cope with economic slump that worsened toward the
end of 2008.
The government has so far compiled a series of stimulus packages worth 75
trillion yen in total to shore up the economy. Following such a trend, the
fiscal 2009 budget will increase 5.49 trillion yen from the initial fiscal 2008
budget, up for the third straight year.
Nakagawa said at a press conference that Japan's economy has been facing a
''critical situation'' and the fiscal 2009 budget will be ''quite important in
protecting people's livelihoods and preventing a further downturn of the
economy.''
He said Prime Minister Taro Aso has stressed the need to take drastic fiscal
spending measures in the short term to turn the economy around, while shelving
fiscal rehabilitation efforts for now.
The ministry's draft fiscal 2009 budget will go through some adjustments from
Saturday and the government is scheduled to adopt the final draft on Wednesday.
The budget will then be submitted to the Diet in January.
To finance the budget, Japan plans to issue 33.29 trillion yen in new
government bonds in fiscal 2009, up sharply from 25.35 trillion yen under the
initial budget for the current fiscal year, Nakagawa said.
The new government issuance planned in the initial budget will exceed the 30
trillion yen mark for the first time in four years. Former Prime Minister
Junichiro Koizumi, who took over the reins of government in April 2001, set the
goal of curbing new Japanese government bond issuance below 30 trillion yen.
The ministry plans to propose an all-time high of 51.73 trillion yen in general
expenditures -- core policy-related outlays -- for fiscal 2009, up from 47.28
trillion yen in the initial fiscal 2008 budget, according to Nakagawa.
The cap on core policy outlays in fiscal 2009 was set in July at 47.84 trillion
yen, but the government took an extraordinary step to increase the amount
toward the end of the year, lifting the upper limit for policy spending for the
first time in 13 years.
The government unusually raised the cap in the fiscal 2009 budget as it decided
to set aside 1 trillion yen in special emergency reserves to deal with a future
deterioration of the economy.
In fiscal 1996, the government revised the upper limit in core policy spending
set in the summer to tackle the failure of housing loan firms.
Tax revenues in fiscal 2009 are expected to amount to 46.10 trillion yen in the
next fiscal year, down 7.45 trillion yen from the initial fiscal 2008 budget
with expected plunges in corporate tax revenues.
The ministry plans to propose about 16.57 trillion yen in local tax grants,
which will be distributed to municipalities, up from 15.61 trillion yen.
Aso has called for boosting money to be provided to local governments as steep
declines in corporate tax revenues have hit municipalities' fiscal positions
hard.
Nakagawa also said the government's fiscal 2009 fiscal investment and loan
program will see the first increase in 10 years to 15.86 trillion yen, to
support fundraising by cash-strapped firms.
The nation's deficit in the primary balance -- annual tax revenues and non-tax
revenues minus outlays other than debt-servicing costs -- is expected to swell
to around 13.05 trillion yen in the fiscal 2009 budget from about 5.2 trillion
yen in the initial fiscal 2008 budget.
The government has not yet ditched its goal of achieving a primary balance
surplus in fiscal 2011, but increased fiscal spending to tackle the downturn
has made it difficult without a step to boost revenues, such as a consumption
tax hike.
==Kyodo