TOKYO -- The fiscal 2017 budget and tax code changes enacted Monday by the Japanese Diet feature a shift in state support from the elderly to children and women, in keeping with Tokyo's goal of a more inclusive society. But they do not include ambitious reforms of the sort needed to get Japan's fiscal house in order.
A key question in crafting the budget was how to hold down medical and elder care spending in a "silver democracy" -- that is, a system where growing ranks of politically active seniors wield outsized influence. Natural growth in social security spending, or the increase necessitated by growing numbers of elderly, came in 140 billion yen ($1.26 billion) below the 640 billion yen originally estimated by the Ministry of Health, Labor and Welfare.
One measure toward this end was raising the amount that those aged 70 and older contribute toward their medical care. For households with annual incomes less than 3.7 million yen per year, the monthly cap on co-pays will be raised from 12,000 yen to 18,000 yen in two steps between now and 2018. This 50% rise will weigh heavily on households living on pension income alone.
Those making at least 3.7 million yen annually face a far larger increase. The co-pay cap, now at 44,400 yen per month, will jump to as much as 141,000 yen. Households whose income exceeds a certain level will also need to pay a larger share of nursing care costs.
Aid for the young
Meanwhile, the budget includes more generous support for families raising children. The government will introduce college scholarships in fiscal 2018, offering students around 30,000 yen per month with no need for repayment. "Creating a country filled with opportunities for children is a cornerstone of opening up a future where all citizens can be actively engaged," Prime Minister Shinzo Abe said after the budget was enacted.
The budget earmarks 100 billion yen to clear chronically crowded waiting lists for day care, aiming to add 500,000 more children. The government will spend another 100 billion yen or so to improve compensation for child-care and nursing-care professionals.
The tax reform package adjusts a break for households with one spouse -- typically a housewife -- who works only part-time or not at all. Currently, the primary earner can claim a tax deduction if the other spouse earns 1.03 million yen a year or less. But critics argue that this measure deters women from working more. The dependent spouse often scales back work hours near the end of the year if annual income is on track to exceed 1.03 million yen.
The revision effectively raises the cap to 1.5 million yen, which should encourage women to play a bigger role in the workforce.
Cost cuts not enough
The Abe administration envisions pursuing growth-promoting stimulus measures alongside efforts to improve fiscal health. The fiscal 2017 budget shows progress on the latter front, meeting the government's goal of limiting the rise in general expenditures -- which exclude debt servicing and certain other costs -- to 530 billion yen.
But Tokyo's scenario requires a sharp increase in tax revenue. The fiscal 2017 budget estimates tax revenue at 57.7 trillion yen, an increase of just 108 billion yen, reflecting stagnation in the economy as Abenomics runs out of steam.
Nontax revenue is estimated at 5.37 trillion yen, a 687.1 billion yen increase. Drawdowns from the government's foreign exchange account are set to rise by 858.3 billion yen. Though debt issuance is down for a seventh straight year, falling 62.2 billion yen to 34.36 trillion yen, this owes largely to the growth in nontax revenue. All told, the budget does not bode well for the government's goal of achieving a primary surplus in fiscal 2020.