1997 BUDGET APPROVED:
77.4 Trillion Yen Plan Includes 4 Trillion Yen Drop in Government Bond Issues

DECEMBER 27, 1996

At a Christmas Day meeting, the cabinet approved the fiscal 1997 (April 1997--March 1998) budget. The general account rose 3.0% from 1996 to reach 77.4 trillion yen (673 billion dollars at the rate of 115 yen to the dollar). General expenditures, which comprise policy-related expenses, reached 43.8 trillion yen (381 billion dollars); the 1.5% annual increase was the lowest in nine years. The government intends to submit the budget plan to the Diet at the beginning of the regular session in January 1997, and hopes to have it approved within the current fiscal year.

The budget was planned primarily around the goal of making 1997 "year one" of reforming the nation's financial structure. As a result, the budget includes only 16.7 trillion yen (145 billion dollars) in government bond issues, or 4.3 trillion yen (37 billion dollars) less than in 1996, partly in expectation of increased revenues from the hike in the consumption tax (from 3% to 5% in April 1997). Because of this expected gain, the budget plan for fiscal 1997 relies on government bonds to account for just 21.6% of all revenues, compared to 28.0% in fiscal 1996.

A look at the main expenditure items shows a 2.1% rise in Japan's official development assistance from the 1996 level to 1.17 trillion yen (10 billion dollars), the goal being to continue and strengthen international cooperation and contributions. The rate of increase in ODA outstrips the growth of general expenditures as a whole. Defense spending increased by 2.0% to 4.94 trillion yen (43 billion dollars), excluding 6.1 billion yen (53 million dollars) in outlays for the consolidation and closure of U.S. military bases in Okinawa.

Social security expenses, the largest single expenditure category because of the continued aging of Japanese society, was held to 14.55 trillion yen (127 billion dollars; a 1.8% annual increase) by measures such as increasing the portion of medical fees to be paid by patients. Public works spending, which jumped 1.3% to a total of 9.85 trillion yen (86 billion dollars), is meant to have a double influence, both with respect to economic recovery and fiscal restructuring.

General Account Budget

Revenues	billion yen	Percent change
Tax and stamp revenues	57,802.0	12.6
Nontax revenues	2,709.5	5.9
NTT proceeds	171.5	0
Government bonds	16,707.0	-20.6
Construction bonds	9,237.0	2.3
Deficit-covering bonds	7,470.0	-37.7
Total	77,390.0	3.0

Expenditures	billion yen	Percent change
Government bond servicing	16,802.3	2.6
Tax grants to local governments	15,481.0	13.8
General expenditures	43,806.7	1.5
Social security	14,550.1	1.8
Public works	9,846.2	1.3
Education, science	6,343.5	1.9
Defense	4,947.5	2.1
ODA	1,168.6	2.1
Others	6,950.8	0.5
NTT and bond proceeds	1,300.0	0
Total	77,390.0	3.0