Japan Slams Brakes on $63 Billion in Spending
Japan said Friday it would suspend 5.0 trillion yen ($63 billion) in spending as a political row has left the government facing a severe cash crunch that could see it run out of money within months.
Officials warned there would not be enough in its coffers to cover expenses as political gridlock ties up the passage of a bond-issuance bill needed to help pay for some 40 percent of Tokyo's spending in the fiscal year to March.
Finance Minister Jun Azumi warned that public reserves would "mostly dry up at the end of November" if the opposition-led stalemate continued, with the current parliament due to end on Saturday. They are expected to restart in October.
"There is a high possibility that we will have to make further delays in November," Azumi told a regular news conference on Friday, as he called on lawmakers to approve the bill.
"If this situation continues into next month and the month after that, the impact on the Japanese economy will not be at all favorable... We could almost run out of money by the end of November."
Japan might have to look at "scenarios that have been possible in the U.S.", Azumi added, referring to a 1995 U.S. government shutdown that forced the temporary closure of many national parks, the furloughing of hundreds of thousands of federal workers and suspension of benefit payments to military veterans.
Although he said such an extreme scenario was unlikely.
"I don't think this government has ever had the same philosophy as the U.S. that administrative functions should be halted if there's no funding," he said.
Tokyo has not been forced to halt budgetary spending due to a funding shortage since the end of World War II, according to the finance ministry.
The affected spending includes tax grants to municipalities, aid for universities and support for government-linked companies, the ministry said.
But the government said it would continue to service its debts, while funding of social security, defense, policing, maritime security, and disaster handling would also continue.
Last month, the opposition-controlled upper house slapped Prime Minister Yoshihiko Noda with a censure motion as it demanded he call snap elections.
The non-binding motion, a symbolic wrist slap signaling the opposition's refusal to work with Noda's cabinet, has tied up passage of any new law including the bond bill that was key to covering Tokyo's deficit spending.
Japan has an eye-watering national debt that amounts to more than twice its gross domestic product -- the highest among industrialized nations, with the costs of a rapidly aging population heaping pressure on public coffers.
Legislators passed a bill earlier this year to double Japan's sales tax to 10 percent by 2015 in a bid to help deal with rising public expenses.
Source: Agence France Presse
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