Japan Mulls Supplementary Budget

by Mary Swire, Tax-News.com, Hong Kong

04 November 2009

Prime Minister Yukio Hatoyama has strongly hinted that his government is considering the option of introducing a supplementary budget using money saved from the scrapping of spending programmes authorized under the previous Liberal Democratic Party administration.

Hatoyama revealed on November 1 that there is a "possibility" the government will draft a second budget containing an additional JPY3 trillion (USD33.3bn) that has become available since the Democratic Party of Japan-led coalition government decided to axe the LDP's stimulus plan, approved prior to their August election defeat.

Indeed, Hatoyama had already given a firm indication that his government intends to use the money saved from a root-and-branch review of the spending programmes it inherited from the Aso administration to channel into its own tax and spending commitments, announced during the election campaign.

"As a result of a review of the supplementary budget for the current fiscal year [that was being implemented by the previous government], we have already succeeded in halting projects which are either unnecessary or not urgent whose aggregate cost was to have been approximately three trillion yen in scale," he told the national assembly in a policy speech on October 26.

"This three trillion yen, as important funds entrusted to us by the public, will be reallocated to uses which help the people go about their daily lives and contribute to economic recovery. We will henceforth continue exhaustively to search out wasteful use of tax monies."

Hatoyama also promised a "full-scale cleanup" and an "exhaustive review" of the way taxpayers' money is spent and budgets are formulated, arguing that:

"We must undertake a top-down formulation of the budget in a manner that is clearly visible to the public and which looks at multiple fiscal years. At the same time we must substantially reform the budget formulation and execution processes so that projects are implemented in a way that enables us fully to explain to taxpayers regarding each budgeted project what kinds of policy goals have been established and how these goals were ultimately achieved."

Hatoyama pledged that the government would provide "direct support" for household finances by establishing a child allowance, and abolish the provisional rates of taxes on petrol. The DPJ has also proposed tax breaks for people buying homes with cash, a cut in corporate tax for small companies and a freeze on the 5% consumption tax for 5 years.

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