Japan will cap new bond sales at 44 trillion yen ($554 billion) next year and reduce public works spending by 10 percent as it attempts to slow the expansion of the world’s largest public debt burden.
The government also plans to limit general spending excluding debt interest payments to 71 trillion yen for the year starting April 1, according to budget guidelines approved by the Cabinet in Tokyo today. The ceilings are the same as the ones set for this year’s budget.
Prime Minister Yoshihiko Noda this month won parliamentary approval to double the nation’s sales tax to 10 percent by 2015 to help pay for rising social-welfare costs. Japan’s outstanding debt issuance reached a record 976.2 trillion yen as of June 30, the Finance Ministry said last week.
Social welfare costs are projected to increase by 800 billion yen in the next fiscal year, according to the statement. The guidelines approved today are the framework for the nation’s annual budget, which is usually compiled in December.
“Japan’s fiscal conditions are worsening seriously and if we leave this problem as it is, concerns about the country’s fiscal sustainability will mount and may cause extremely adverse effects on the economy and the Japanese people’s life,” the guideline said.
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