Extra outlays for municipalities to shrink 40% in Japan's FY 2014 budget
TOKYO (Kyodo) -- Finance Minister Taro Aso and Internal Affairs and Communications Minister Yoshitaka Shindo agreed Saturday to cut outlays designed to bolster regional economies by 40 percent from fiscal 2013 to 610 billion yen in a draft state budget for fiscal 2014.
The reduction would lead the amount of tax allocations to local governments to shrink 170 billion yen to around 16.89 trillion yen for the second straight year of decrease.
Aso and Shindo reached the agreement as the Cabinet of Prime Minister Shinzo Abe plans to approve the draft budget on Tuesday.
Citing a pickup in local tax revenue, the Finance Ministry has called for abolishing or halving the outlays worth about 1 trillion yen, which the government has earmarked since fiscal 2009 to cushion the potential impact of the collapse of Lehman Brothers Holdings Inc., a U.S. investment bank, in 2008.
But the Ministry of Internal Affairs and Communications, which oversees municipalities, has lobbied to maintain the outlays, saying a sharp cut would affect administration of local governments.
Despite the envisaged cut, the economic recovery and a planned increase in the consumption tax rate from 5 percent to 8 percent in April -- the start of fiscal 2014 -- are expected to expand local tax revenue by 1.4 trillion yen, which, together with local tax allocations and issuance of local government bonds, would give municipalities a total of 60.36 trillion yen.
The total represents an increase of 610 billion yen from the fiscal 2013 level.