(The original article in Japanese was posted on December 9, 2022)

On December 2, The House of Councilors approved the second supplementary budget of the fiscal year ending March 2023. Total general account expenditure is estimated to be 28.922 trillion yen, and the government forecasts that the effect on a real GDP increase will be 4.6%. This was explained as “an investment to properly support daily lives of the citizens and corporate activities and push the Japanese economy toward a one-step-higher growth track in the current situation where global price hike is getting more severe and concerns about economic downturn are increasing.”
Nevertheless, I wonder how much short-term and direct demand stimulating effect this enormous supplementary budget of approximately 29 trillion yen can create. The 29 trillion yen includes 4.7 trillion yen of reserve funds whose use is undetermined and 8.9 trillion yen of government spending for accumulating funds for specific policy purposes. A supplementary budget is essentially a budget to cover “especially urgent expenses” incurred after the main budget has been approved, namely, an extra allocation to be added and used temporarily for emergency appropriations. It is undeniable that this huge amount was allocated and passed to show off the impactful “30-trillion-yen economic policy,” which may only work to highlight the scale of the budget to politically gain attention from the people.

Needless to say, it is necessary for the national government to arrange reserve funds to be used for unforeseen situations and to make investments based on a long-term perspective. Innovations of small and medium-sized enterprises as well as the shift of production of antibacterial drugs to domestic production and support for career changes to get better jobs are also important measures. However, I do not believe that they are something to be incorporated in the supplementary budget. Is it really necessary to establish 16 new funds at this time even though there have already been 34 existing funds? These projects have to be parts of the long-term strategies of the country and therefore should have been included in the budgets as investment for measures or projects under sound and solid policies, effects of which are verifiable, not in the emergency framework of the “supplementary” budget.

On December 7, Ministry of Land, Infrastructure, Transport and Tourism (MLIT) announced that the extension cost of the Hokkaido Shinkansen will increase by 645 billion yen, reaching 2.3 trillion yen in total. Is the expenditure spent on this project expected to be recovered? Will the return on the investment be verified properly? Who will shoulder the additional cost for the extension? On the same day, the requirements for receiving “Vision for a Digital Garden City Nation” grants were announced. Municipalities having 53.9% or higher of the application rate of obtaining My Number Card will be eligible to receive the grants. It was also reported that the amount budgeted for the grands is 80 billion yen. In the first place, I wonder why it has not been openly discussed to make the obtainment of My Number Card obligatory if it will be beneficial for Japanese citizens.

The national government will allocate 43 trillion yen, which will be one and a half times as large as the amount spent in the past, over the next five years. The annual shortfall of financial resources will be covered by doing expenditure reform and from non-tax receipts and a surplus for 3 trillion yen, and the remaining 1 trillion yen will be secured by increasing taxes. However, it has not been cleared what will be cut through the expenditure reform. Also, discussions on tax hikes are still to come. First of all, 22.8 trillion yen of the supplementary budget comes from additional issuance of government bonds. Everything has been postponed, short-sighted, and expedient. One of leading members of government officials commented that “It will cause a negative impact on the outcome of an election to argue over tax increase before the unified local elections.” This is wrong. A “policy” should be made with both benefits and burdens taken into consideration at the same time, and only after this is realized, we can see the overall picture of the future. I expect to see a policy debate to be conducted to look into the future.

This Week’s Focus, December 9, 2022

Takashi Mizukoshi, the President