December 26 2009 00:44 TOKYO, Dec. 26 KYODO
Only 100 days after being launched with a strong drive to cut wasteful use of taxpayers' money, Prime Minister Yukio Hatoyama's Cabinet is in hot water for fueling worries over Japan's fiscal discipline.
Hatoyama fought the clock to meet his self-imposed goal of drafting the fiscal 2010 budget by the end of December.
But when it comes to the size of the budget, not the process, it is a far cry from what he promised to the electorate who ended a half-century of near unbroken rule by the Liberal Democratic Party.
The budget plan, approved by the Cabinet on Friday, says the central government will spend a record 92.30 trillion yen from the general account, up from this fiscal year's initial budget of 88.55 trillion yen.
It happened despite Hatoyama having said he would be able to raise enough money for his manifesto pledges focused on boosting domestic demand without inflating expenditure from the level during former Prime Minister Taro Aso's time in power.
In a bid to ease public fears over the nation's eventual fiscal collapse, members of the Democratic Party of Japan, which swept to power in a landslide election victory in August, said often during the campaign that their budget approach might be likened to ''replacing new apples with old ones in a cardboard box.''
The size of the cardboard box would be exactly the same as before, they said, because the DPJ would first fill the box with its fresh apples and put some of the existing ones back into it until there was no more space.
In conformity with this analogy, the DPJ had to obtain a new larger box at the end to squeeze its own apples into, while giving up on throwing away some of the old ones, so as to say it had judged them as still edible while the clock was ticking.
Since receiving 95.04 trillion yen worth of budgetary requests from central government offices in October, Hatoyama has wavered between whether to hold fast to his manifesto commitments or to give more priority to the restoration of fiscal health.
Furthermore, he was engulfed by reignited worries about the course of the Japanese economy on the double whammy of a strong yen and deflation, heightened especially after the debt problems in Dubai in late November, when the drafting process entered the last phase.
The dilemma and the changing economic environment apparently made it difficult for Hatoyama to show a decisive attitude.
That continued until Ichiro Ozawa, the powerful secretary general of the ruling party, gave Hatoyama a kick in the rear to review some of his campaign pledges, most notably to repeal provisional surcharges on gasoline and automobile-related taxes.
Hatoyama decided to implement a child-allowance program, the centerpiece of the pledges, in fiscal 2010 without an income cap, contrary to Ozawa's request.
But his last-minute decision to abolish the surcharges but maintain the same level of taxes saved him from facing the worst scenario of failing to meet his goal to limit new government bond issuance to around 44 trillion yen.
Whether Hatoyama can meet the numerical target has grown over the past month into the touchstone for determining how serious he is about the country's already grave fiscal condition.
Apparently knowing that his public support has been falling amid doubts about his decision-making ability, Hatoyama wanted to avoid missing the debt target and the year-end deadline by any means, even if not successfully scaling down the size of the budget as much he had hoped for.
Many economists predict that the impact of the budget on Japan's growth next year will likely be marginal, although the new government shifted the focus of spending to households from big businesses and public works projects.
''To a certain degree, the government should be praised for barely keeping its promise of not planning to issue more than 44 trillion yen in new government bonds,'' said Yuichi Kodama, chief economist at Meiji Yasuda Life Insurance Co.
Kodama said the DPJ's policies could help to boost personal consumption in the latter part of next year.
But compared with the possible annual budget of the LDP if it had remained in power, he said the economic impact of the latest budget will be neutral, partly because a huge cut in public works projects is likely to eat into growth to be driven by personal consumption.
Amid speculation that the DPJ may need to prepare an extra budget to counter a possible economic slowdown prior to an upper house election in July, Kodama said, ''The next focus will be on whether new deficits in fiscal 2010 will swell from the planned level.''
For Hatoyama, real life with its numerous challenges is beginning as his honeymoon period, which turned out to be not so sweet, is now over.
==Kyodo
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