Japan’s government plans to cap new bond sales and budget spending as it attempts to slow the expansion of the world’s largest public debt burden.
Bond issuance for the year starting April 1, next year, will be held at ￥44 trillion (US$559 billion) according to a framework released on Friday by the Cabinet Office.
General spending, excluding debt servicing costs, will be limited to ￥71 trillion for the three years starting April 1.
Parliament passed a law this month doubling the sales tax to help rein in the nation’s record debt and pay for soaring welfare costs. The government estimated in January that it would probably miss its goal of balancing the budget by 2020.
Japan must “work for both economic growth and fiscal consolidation,” and it is necessary to “secure the acceptance of the markets as well as revitalizing the economy,” the plan said.
The government already planned to limit expenditure for the fiscal year starting April 1 to ￥71 trillion, according to budget guidelines approved by the cabinet earlier this month.
This fiscal year, interest payments on debt are more than 24 percent of total government spending.
Meanwhile, Japan plans to downgrade its assessment of the domestic economy for the first time in 10 months due to the impact of a slowdown in China and other countries, the Nikkei newspaper reported.
The government will cut its view on production and exports in its monthly report to the cabinet because of declines in sales to China and Europe, the Nikkei reported. Japanese Economy Minister Motohisa Furukawa will present the report on Tuesday, the newspaper said.
The downgraded assessment reflects increased pessimism about the outlook for the world economy, with Japan’s exports to Europe last month falling to the lowest level since February 2009 and the pace of China’s expansion set to decline for the seventh straight quarter.
Last month’s report stated that while domestic demand was supporting the economy, a global slowdown was becoming more widespread.
The government plans to tone down the assessment of the domestic economy in this month’s report by adding words such as “weaker movements in some sectors,” the Nikkei reported, after the country had a wider-than estimated trade deficit last month due to a fall in exports to China and Europe.
Japan’s shipments to the EU fell 25 percent last month from a year earlier, while those to China slipped 12 percent, the Japanese Finance Ministry said on Wednesday.