LDP panel urges spending cap, countering growth advocates



The Japanese government should set a spending cap for the fiscal year from April 2018, an influential ruling party panel said in a draft proposal, challenging senior government officials who have stressed economic growth over spending cuts as a means to rein in Japan’s bulging debt.

In the draft proposal seen by Reuters on Wednesday, the Liberal Democratic Party committee urged strict spending curbs from the 2016/17 fiscal year with an expenditure target two years later to cap spending. That will coincide with the promise by Prime Minister Shinzo Abe’s government to cut the national deficit to 1% of GDP by fiscal 2018/19 from about 3.3% for the latest fiscal year.

The focus on spending restraint contrasts with moves inside the government to focus on boosting growth, including a plan to use rosier tax revenue estimates to make the budget-balancing math work.

“Discussions about uncertain increases in tax revenues and discussions about delaying spending restraint will be taken as the government and ruling parties shirking their responsibility and will lose the trust of the public and markets,” said the draft by the LDP’s special committee on fiscal reform.

The panel, headed by LDP policy chief Tomomi Inada, will present the proposal to the full party on Friday and aims to have it included in the government’s annual blueprint on economic and fiscal policy at the end of this month, said a person involved in the deliberations, who asked not to be identified because the proposal had not been made public.

A draft of the annual policy blueprint, released on Wednesday, focused on growth over austerity, saying the government should lay the economic groundwork to raise the sales tax in 2017 and to “respond flexibly, as appropriate” to smoothly implement the planned hike.

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