Japan Budget 2012-13

Japan is in a critical financial condition with national debt that has risen to 106.40 trillion yen and the major challenge for the 2012 budget would be to address this issue effectively.
For the 2010-11 fiscal, Japan�s GDP stood at �538.532 trillion � according to government estimates the GDP will see a real growth rate of 0.5 percent in 2011-12 fiscal. In 2012-13 this growth rate will vary between 2.7 and 2.9 percent.

For the 2012-13 fiscal, Japan is looking to achieve the perfect balance between curbing public debt and maintaining a steady rate of economic recovery from the repercussions of the events of 11th March.

Expectations from Japan Budget 2012-13:
Economic experts feel that tax hikes will be necessary to allow growth and overall economic sustainability. They feel that if tax rates are not increased then Japan would not be able to reduce its primary budget deficit to 50 percent of the present levels by 2015.

Credit rating agencies such as Moody�s feel that the 2012 budget will be critical in getting a good credit rank for Japan. It has said that Japan needs to focus on economic sustenance and continuity while deciding on the budget.

However, Japan might face several problems in creating an effective budget with problems like shortage of power supply after the events of 11th March, reduced global demand and the rising value of yen. It faces other economic issues as well, such as reducing tax revenues and corporate income levels.

Highlights of Japan Budget 2012-13:

3.5 trillion yen is expected to be earmarked for reconstruction related projects. Lesser requests will be accepted by the government.
The budget is supposed to allocate 98.4 trillion yen for the 2012-13 fiscal, which is a record amount. This sum will be realized only if the requests from various national ministries are accepted. This is 1.8 percent higher than the sum allocated in the 2011-12 budget.
Japan is looking to spend a maximum of 71 trillion for non-debt services and 44 trillion yen for issuing new debt financing instruments.
Reconstruction related expenses would not be included while deciding the borrowing and spending targets. This money would be generated by increasing tax rates.
19 trillion yen would be spent in the coming 5 years for reconstruction of affected areas.
Government will be focusing on putting in place a certain level of financial discipline across various levels.
3.51 trillion yen has been requested for various reconstruction related projects in Tohoku following the natural disasters of 11th March.
Requests for local economic recovery and stimulus have amounted to 1.98 trillion yen. In the preceding allocation this sum was decided at approximately 700 billion.
The biggest request of fund allotment has come from the Health, Labor and Welfare Ministry 29.30 trillion yen. The average age of Japan s population has been increasing steadily and this has contributed to the surging social security expenses, which has in turn led to the demand.
The finance ministry has asked for 204 tax cuts which have a combined worth of almost 910 billion yen; in 2011, 1.56 trillion yen had been earmarked for this purpose.
The Ministry of Economy, Trade and Industry has asked for tax cuts pertaining to the automobile industry 721.8 billion yen. This sum will be used to spur car purchases in the domestic market. Of late the high value of the yen has affected the automobile companies profits.
Requests to either deduct or end the exemption being granted to taxable income of married taxpayers have been registered. Some have also suggested increasing the tobacco tax rates but no specific amount has been stated.
Expectations from Japan Budget 2012-13:
Economic experts feel that tax hikes will be necessary to allow growth and overall economic sustainability. They feel that if tax rates are not increased then Japan would not be able to reduce its primary budget deficit to 50 percent of the present levels by 2015.

Credit rating agencies such as Moody s feel that the 2012 budget will be critical in getting a good credit rank for Japan. It has said that Japan needs to focus on economic sustenance and continuity while deciding on the budget.

However, Japan might face several problems in creating an effective budget with problems like shortage of power supply after the events of 11th March, reduced global demand and the rising value of yen. It faces other economic issues as well, such as reducing tax revenues and corporate income levels.
Highlights of Japan Budget 2011-12:
Following are some highlights of the latest additions made to the Japan budget for the 2011-12 fiscal:
12.1 trillion yen has been set aside for rebuilding the coastal areas in Northeastern Japan following the earthquake and tsunami that occurred on 11th March. It is expected that this would lead to an increase of 1.7 percent in the GDP.
11.73 trillion yen has been earmarked for taking measures that will help to prevent further damage from natural disasters.
The budget includes an assistance plan for companies that have been facing problems with the national currency s growing value.
2 trillion yen has been earmarked for direct expenses. It is expected that this amount will be used to implement measures, which can stop companies from taking their business activities outside the country. This will also assist these organizations in procuring natural resources from outside the Japan.
Additions have been made to a fund comprising 10 trillion yen this resource will be used by Japanese organizations to buy overseas companies. It is expected that this move will further increase the global exchange value of the yen.
Efforts will be made to bring down yen s value.
9.24 trillion has been earmarked for reconstruction. This will include 2 trillion yen that will be used as subsidies.
Approximately 600,000 jobs will be created in the budget.
The central government intends to spend 19 trillion through the next 5 years. This sum will be used for rebuilding areas that were affected by the natural disasters on 11th March.
In the present fiscal the government has already allotted 6 trillion yen through a couple of additional budgets.
The government received budget requests amounting to 96.75 trillion and reduced it to 92.41 trillion yen while compiling the final budget. This was a record amount as well. Out of this amount 22.6 trillion will be used for debt servicing and 75.8 trillion will be used for non debt servicing. Debt servicing will include debt redemption and payment of interests. The amount required for debt servicing has gone up by one trillion yen given the ever-increasing volume of national debt.

Expectations from Japan Budget 2011-12:
There are provisions in the latest budget for the 2011-12 fiscal whereby financial assistance will be available to companies in order to encourage them to buy shares in business houses outside the country. The analysts, though, feel that this aid will not be too useful because of the global financial condition.

The Finance Minister of Japan, Jun Azumi has said that through the new budget they will like to provide financial assistance to companies that are facing problems owing to the rising value of yen. The government is also looking to strengthen its economic recovery that has started with the recent improvement in supply chains.

Traders in Japan are skeptical about the steps the national government is adopting in order to curb the rising worth of yen as they feel this might lessen the global importance of Japan�s national currency.

They feel that at present yen is an attractive proposition for global investors because of the levels of Japan�s current account surplus and continued deflation. Analysts are also stating that the budget�s effects would be properly felt from April 2012 onwards.

The Bank of Japan has stated that in 2011-12 the national economy will see a growth rate of 0.3 percent and 2.2 percent in 2012-13.

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