July 19, 2014 2:28 am JST

Japan aims to rein in fiscal 2015 bond offerings

TOKYO -- The Japanese government plans to keep new bond issuances in fiscal 2015 below the 41.3 trillion yen ($403 billion) planned in the current fiscal year's budget, with debt funding declining for a second straight year, The Nikkei has learned.

     Japan has pledged to cut its primary-balance deficit by half in fiscal 2015 from fiscal 2010 as a percentage of its nominal gross domestic product. To achieve this, the primary-balance deficit at the national level needs to go down from 18 trillion yen in fiscal 2014 to 15 trillion yen in fiscal 2015, suggesting that the budget must set hoops for both spending and revenue.

     With Japan's sovereign debt exceeding a whopping 1,000 trillion yen, a rise in new bond offerings could also send the wrong message to the bond market, stroking investor distrust.

     The government has also set draft guidelines for budgetary requests from ministries and agencies, to be approved by the cabinet on July 25. Such requests are expected to surpass 100 trillion yen for the first time ever, but the government will seek cuts to bring down the figure during budget negotiations at year's end. Budget requests from agencies totaled 95.9 trillion yen in fiscal 2014's initial budget.

     The increase in social security outlays, including pension and medical spending, will be limited to the rise stemming from the aging of the population, or roughly 800 billion yen. The Finance Ministry will seek higher efficiency in spending to social welfare corporations that have internal reserves totaling 2 trillion yen, for example.

     The growth in tax grants to localities will also be adjusted to bring them in line with Japan's overall goal of fiscal restoration.

     To advance initiatives spelled out in its growth strategy announced in June, the government will solicit project proposals under a special 4 trillion yen spending quota.

     Government agencies will first be asked to cut their discretionary spending, such as public works outlays and R&D assistance, by 10%. They can then ask for up to 30% of the reduced budget figures as extra spending for special projects under the 4 trillion yen program.