Japan's parliament enacted an 82.18 trillion yen ($778.7 billion) budget on Wednesday for the fiscal year starting in April, featuring reductions in spending and bond issuance to help tackle ballooning public debt. The widely expected passage by the upper house followed the more powerful lower chamber's approval earlier this month and allows the government to operate with the budget from the beginning of fiscal 2005/06. The budget for the year starting in April is little changed from 82.11 trillion yen for the current year.
But general spending - a crucial part of the budget covering most of the key spending for defence, public works and social welfare - will fall 0.7 percent to 47.28 trillion yen, the first cut in three years.
Spending will be trimmed in areas such as education, defence, public works and official development assistance (ODA), while social welfare costs will rise due to a growing number of pensioners.
"For us, it has been important to show our determination to maintain fiscal discipline through this budget," Finance Minister Sadakazu Tanigaki said after the budget's passage, citing cuts in general spending and bond issuance.
With the budget passage safely out of the way, the government can now tackle the most controversial item on the agenda - passage of bills to privatise the nation's sprawling postal system.
Prime Minister Junichiro Koizumi said on Wednesday he would aim to submit those bills in April.
Many within Koizumi's own ruling Liberal Democratic Party have been opposed to his plan to privatise the postal system, the world's largest deposit-taking institution and insurer that is often criticised for funding wasteful public works spending and for undermining the financial industry.
"I don't expect the bill to be defeated," Koizumi told a news conference.
"I expect it to pass and we will get the ruling coalition's co-operation," he said, adding that he did not plan to extend the current parliamentary session for now. The session is scheduled to end on June 19.
He also rejected speculation that he would reshuffle his cabinet in September.
Koizumi also noted the economy was showing signs of brightness despite formulating budgets during his tenure that rely less on public works spending.
Despite efforts to cut budgetary spending, analysts have said the government could have done more to rein in massive debt.
For instance, analysts doubt there will be much demand for approved projects such as three short bullet-train lines in rural Japan and a new airport in Kobe, western Japan.
Repeated pump-priming measures over the past decade, mostly financed by bond issuance, have left Japan with the biggest public-sector debt in the industrial world.
The outstanding debt is set to climb to around 770 trillion yen ($7,296 billion) by the end of fiscal 2005/06, or some 150 percent of gross domestic product (GDP).
Italy, the most indebted of major European countries, had a debt-to-GDP ratio of around 106 percent in 2004.
Debt-servicing costs, or the funds needed to make interest payments and redeem outstanding bonds, will rise 5.0 percent from this year's budget to 18.44 trillion yen.
Tanigaki said many Japanese have various concerns about Japan's massive debt, adding that his ministry would hold town meetings to exchange views with the public on the country's fiscal condition.
"Japan's fiscal situation is severe and we cannot move forward and achieve fiscal reforms unless we gain understanding from the public," he added.
On the revenue side of the budget, tax income is expected to be 44.01 trillion yen, up 5.4 percent from this year's initial estimate of 41.75 trillion yen, thanks to brisk corporate activity - a key driver behind the economy's recent recovery.
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