Japanese Government Announces Record-Breaking USD1 Trillion Budget

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

04 January 2010

Japanese Prime Minister, Yukio Hatoyama, announced in late-December details of his government’s maiden budget, the largest in the country’s history, focused on “investment in people, not concrete”.

The budget cuts unnecessary spending and channels additional funds into healthcare, childcare, the environment and into maintaining employment.

Despite rising debt, the Japanese government has continued with its policy of investing through the downturn to ensure a strong recovery. However, the government’s JPY92.3 trillion (USD1 trillion) budget will sink Japan further into the red, with spending expected to outweigh revenue by around JPY45 trillion (USD484bn), financed mainly by a JPY44.3 trillion bond issuance.

The government foresees further deterioration in tax revenues, to JPY37.4 trillion (USD403bn) from JPY46.1 trillion in the 2009 fiscal year.

Outlining the major points of the budget, Hatayoma explained that for the coming fiscal year, public works-related expenditures would be cut by 18% and government ministries would receive JPY2.7 trillion less funding.

In line with the budget's social ethos, social security-related expenditure is to be increased by 10%.

A major feature of the budget bill is the ten-fold increase in subsidies for businesses that maintain employment levels, eligible to businesses that have seen a fall in earnings and profits. It is hoped that through this initiative 750,000 jobs will be saved at large companies and a further 1.55 million at small and medium-sized enterprises.

There are few tax measures included within the bill, with those mentioned including an increase in the tax rate on tobacco by 3.5%, and the abolition of provisional duties on petrol and other provisional road related fees.

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