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Japan cuts defense spending in budget, ups care for elderly

Japan's parliament passed a tight national budget for the upcoming fiscal year on Friday, trimming defense and foreign aid spending while hiking funds to care for the rapidly growing ranks of elderly.

The upper house voted 134 to 101 to pass a 82.11 trillion yen (US$773.75 billion) budget for the fiscal year starting April 1, a 0.4 percent increase over fiscal 2003. The spending package had been approved by the more powerful lower house earlier this month.

The package will be funded in part by a record 36.59 trillion yen (US$344.80 billion) in government bond issues due to falling tax revenues, continuing a borrowing binge that has turned Japan into one of the world's most indebted countries.

Spending on education will shrink 4.1 percent and public works outlays will contract 3.5 percent. Defense spending will drop 1 percent despite government plans to buy new Patriot anti-missile batteries to guard against possible attacks by North Korea.

Foreign aid, a mainstay of Japan's foreign policy, will decline 4.8 percent despite Tokyo's generous pledges to Iraq and Afghanistan in support of US-led reconstruction efforts.

Aid for China -- which peaked at 227.3 billion yen (US$2.14 billion) in fiscal 2000 and has since declined by almost half -- may fall further amid increasing doubts about whether that country's rapidly growing economy needs Japan's help anymore.

For Iraq, Japan has pledged US$5 billion through 2007, the second highest amount after the United States. About 100 billion yen (US$940 million) of this is allocated in the budget approved Friday.

Despite efforts to control deficit spending, Japan's outstanding debt is expected to rise to 143 percent of gross domestic product by March 2005 -- the highest ratio among the world's industrialized countries.
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