Naoto Kan plans to limit new bond sales of 44.3 trillion yen in 2011

Japanese Prime Minister Naoto Kan plans to limit new bond sales of 44.3 trillion yen ($ 534,000,000,000) in 2011 to finance a record budget in an attempt to stimulate demand and boost business growth.

The country's budget will amount to 92.4 billion yen in the year from April 1, according to a proposal approved today by the Council of Ministers in Tokyo. Kan is committed to maintaining the bond sales unchanged for three years to curb the industrialized world's largest debt burden.

Kan budget juggling the need to stimulate demand in an economy battered by the yen up to a deflation in 15 years, and reduce the burden of debt twice the size of gross domestic product. The increase in sales tax to improve Japan's finances might not be feasible because it runs the risk of a further decline in his popularity, Nikko Cordial Securities Inc., said.

"Given the political situation will be difficult for Khan to discuss a tax increase sales," said Hidenori Suezawa, chief strategist at Nikko Cordial Securities in Tokyo. "There is no doubt that the government will have a harder time compiling the budget for next year as social security costs swell and run out" of the sources of income.

Japan's economy will shrink this quarter, due to the stimulus of government spending expire and reinforced the strength of the yen threatens export profits. The government said this week that he expected growth to slow to 1.5 percent next fiscal year of 3.1 percent.

The job cuts

JVC Kenwood Holdings Inc., a Japanese manufacturer of audio equipment, video cameras and televisions, said it plans to eliminate 500 jobs at its unit Victor Japan due to the appreciation of the yen and competition from Asia have reduced income.

The yield on the benchmark 10-year note rose to 1.16 percent at 6:56 pm in Tokyo. The yen was trading at 82.90 as of 18:57 has fallen 2.9 percent against the dollar to a 15-year high of 80.22 reached on November 1.

The government also said today it plans to add ¥ 5000000000000 145000000000000 yen reservations aside pool of currency intervention, after Japan sold yen for the first time in six years on 15 September.

Japan's primary deficit was reduced to 22,700,000,000,000 yen from 23.7 trillion yen, the Finance Ministry said, equivalent to about 4.7 percent of GDP. Khan wants to publish a primary balance, which can be achieved when revenues match expenditures, excluding bond sales and interest payments for the year 2020.

The decline in income

The government hopes that new bond issues over the tax revenue of 41 billion yen for a second consecutive year. Japan tax revenues have declined more than a third after peaking in 1990 ¥ 60,100,000,000,000.

Sales of all bonds and obligations including to refinance maturing debt will take place next year ¥ 144900000000000 144300000000000 yen, according to the proposal. Nikko Suezawa said the amount of bond sales were within expectations and have a limited market impact.

Kan submit the draft budget to Parliament, where it is almost certain to be approved by the ruling party controls the more powerful lower house.

Lack of Leadership

Prime Minister 7000000000000 yen tapping unused accounts and reserves to pay for the plan, including money from an account in foreign currency reserves and accumulated funds from a company affiliated with the government railway. Finance Minister Yoshihiko Noda said the government needs to find a sustainable source of funds.

"This outstanding debt and low tax revenues, obviously, suggest the need to increase taxes, including sales tax," said Yoshiki Shinke, economist at Dai-Ichi Life Research Institute in Tokyo. "The real obstacle is the lack of political leadership."

The ruling Democratic Party of Japan lost ground in the midterm elections in July after Kan proposes increasing the nation's 5 percent sales tax to restore the finances. Kan Cabinet's approval ratings fell to 21 percent, the lowest since he took office in June, the Asahi newspaper reported on 13 December.

To meet budget guidelines Kan, DPJ abandoned its promise to double the child care leaflets to households, which limits the increase to families with children under three years old.

'Troubling' initiatives

Yoshimasa Hayashi, a legislator from the opposition Liberal Democratic Party, said Khan plans expenses are increasing the risk of a bond market crash and his cabinet should implement more aggressive measures to restore fiscal health of the nation. "There are many worrying spending initiatives" in the proposed budget, said in an interview Dec. 20 in Tokyo.

bond yields in Japan are the lowest in the world. About 95 percent of holders of domestic investors. A total of ¥ 908800000000000 Japanese government bonds are outstanding, making the country the largest global debt market.

Japan is one of the four economies, together with Greece, Italy and Portugal, to the enhanced risk of needing a drastic reduction of the budget to avoid uncontrollable debt, according to an IMF report in September.

aging of the nation is also putting pressure on their chests. social security costs, which have risen more than 60 percent since 2000, representing 53 percent of next year's general expenses. Families receiving welfare payments rose to a record $ 1.4 billion in September as the data were compiled in 1951, according to the Ministry of Social Welfare.

There is good news

The Japanese government has said it plans to reduce corporate taxes by 5 percentage points next year to stimulate investment and employment without obtaining funds to cover about 1.5 trillion yen of losses of income. That may be a sign that Japan is losing its commitment to reduce its debt, "said Azusa Kato, economist at BNP Paribas in Tokyo.