Third supplementary budget proposal: Can this lead to a recovery in the real economy in the middle of fiscal deterioration?

Third supplementary budget proposal: Can this lead to a recovery in the real economy in the middle of fiscal deterioration?

Prime Minister Naoto Kan has instructed the drafting of the third supplementary budget for the current fiscal year, which includes additional economic measures, in order to ensure a recovery in the economy while balancing thorough measures to prevent the infection of the new coronavirus and socio-economic activities. The government’s decision to start drafting the third supplementary budget is aimed at under supporting the economy with unsealed support measures, but since the fiscal situation is deteriorating further, the question is how to allocat the budget to effective measures and lead to the recovery of the real economy.
Due to the effects of the new Coronavirus, Japan’s economy experienced a historic decline in the growth rate of gross domestic product from April to June, with an annual rate of minus 28.1%.

On the 16th of this month, preliminary figures for GDP from July to September will be released, but private research firms and others predict that the rate will improve significantly, but will not return to pre-infection levels.

In addition, infection is spreading again in the United States and Europe, and the outlook for the global economy is being increasingly uncertain.

In light of this situation, the government considers that unsealed support measures are indispensable for supporting the economy, and this year’s third supplementary budget proposal and the next fiscal year’s budget proposal are combined to form a “15-month budget.”

In this,
Measures related to the spread of Corona Virus infection, promotion of digitalization, reduction of greenhouse gases, employment measures, disaster prevention measures, etc. are being studied.

The size of the budget is the largest ever, already relying on government bonds for more than 50% of the financial resources

The size of the government’s general account for the year.

More than 102.600 billion yen, the largest ever at the time of the initial budget,
In addition
More than 25.600 billion yen in the first supplementary budget,
By spending more than 31.900 billion yen in the second supplementary budget,
The annual spending scale also swelled to more than 160 trillion yen, the largest ever.

JGBs issued as a source of financial resources
More than 32.5 trillion yen in the initial budget,
More than 25.600 billion yen in the first supplementary budget,
The second supplementary budget amounted to more than 31.900 billion yen.
The total amount issued this fiscal year has already exceeded 90 trillion yen.
This is the worst situation in the overall budget this year, with 56.3% of sales relying on government bonds.

In addition, this fiscal year’s tax revenues are expected to be significantly less than originally expected due to a deterioration in the economy, such as corporate taxes, and the fiscal situation is expected to become even more severe.

For this reason, when organizing a budget, it is being asked how effectively the budget can be allocated to individuals and companies affected by the new coronavirus, which will lead to a recovery in the real economy.