Japan eyes renewable energy in new budget

Tokyo, August 17, 2012 — The cabinet of Prime Minister Yoshihiko Noda approved guidelines to create the state budget for fiscal 2013, underscoring the need for financing an economic growth strategy, including the development of renewable energy resources.

The guidelines, or the rules for drafting the initial budget for the year starting next April, also stressed that Japan will maintain fiscal discipline, capping major policy spending at about $896 billion, as in the current year. Tokyo will also keep the $553 billion limit on new debt issuance.

The Finance Ministry requires other government offices to submit their requests for the budget by Sept. 7. It will draw up in late December a draft budget expected to total about $15 billion, before the government submits it to the Diet early next year.

But uncertainty remains over the schedule for drawing up the budget as Noda has said he will call a general election in the near future. This could lead to a change of government, with the process restarted from scratch.

The new budget will focus on financing Japan's growth strategy, allowing ministries and agencies to request a total of $25 billion to $50 billion in spending in the areas of the environment, medicine and health, as well as agriculture, forestry and fisheries.

The government offices can ask for a bigger amount of funds for growth policies, depending on how much they cut other spending. One of the top priorities under the new budget is to help develop wind, solar and other renewable energy resources to replace nuclear power.

Under the new budget, major policy spending will be capped at 893 billion, which excludes debt-servicing and other costs. The move signals the government's continued efforts to improve Japan's fiscal health, the worst among major developed countries, given swelling welfare costs.

Each government office has to reduce general policy spending, which excludes personnel and other administrative costs, by up to 10 percent to secure the spending for the growth strategy, while no upper limit is set on requests concerning reconstruction work following the March 2011 earthquake and tsunami.

On social security, the government will accept additional spending of about $10.5 billion on top of the level for the fiscal 2012 budget, in which some $332 billion was initially set aside, due to the growing number of elderly people and retirees. At the same time, the government will proceed with reforms to streamline welfare services.

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