Japan has managed to meet its caps on spending and new bond issuance in compiling a budget for the year from next April, the finance minister said on Friday, as the government struggles to mend its tattered public finances.
Yoshihiko Noda said he hoped the 2011/12 budget, which is expected to be approved by the cabinet later on Friday, will help to boost the flagging economy and job market.
But a divided parliament clouds the outlook for its implementation, creating an additional headache for Prime Minister Naoto Kan as he confronts low voter support and a rift within his party.
The first budget that the Democratic Party-led government has compiled from scratch keeps new borrowing at about 44.3 trillion yen ($534 billion), in line with its promise to hold fresh debt issuance to this year's level.
Noda also said the government had adhered to a self-imposed cap on spending, excluding debt servicing, at this year's level around 71 trillion yen, aiming to rein in a public debt that is about the twice the size of its $5 trillion economy.
The Democrats can push the budget through parliament with their majority in the more powerful lower house, and a rule that allows it to become law after 30 days even if the opposition-controlled upper house votes it down.
But in order to fully implement the budget from the start of the next fiscal year on April 1, the government needs so-called enabling bills, such as one on issuing deficit-financing bonds, which need to be approved by both houses of parliament.
Tax revenues are seen rising to about 41 trillion yen, falling short of new debt issuance for a second straight year despite an increase of about 4 trillion yen compared with this year's initial budget figure as the economy recovered from a deep recession.
"The fact that new bond issuance exceeds tax revenues is not at all normal. We need to rectify this as soon as possible," Economics Minister Banri Kaieda told reporters.
To balance the 2011/12 budget, the cash-strapped government is expected to scrape together about 7 trillion yen of non-tax revenues, the bulk of it by raiding cash reserves from its special accounts and administrative agencies.