TOKYO, Dec 24 (Reuters) - Japan's government approved a record 92.4 trillion yen ($1.1 trillion) draft budget on Friday for the year from next April, keeping a self-imposed cap on new debt although it faces a tough road ahead to fix its tattered public finances.
The first budget that the Democratic Party-led government compiled from scratch keeps new borrowing at 44.3 trillion yen, in line with its promise to keep fresh debt at this year's level to rein in a huge public debt.
Tax revenues, seen at 40.9 trillion yen, will fall short of new bond issues for a second straight year on an initial budget basis, even as they increased 3.5 trillion yen from this year with the economy's recovery from a deep recession.
To balance the record budget, the cash-strapped government scraped together 7.2 trillion yen of non-tax revenues, the bulk of it by raiding cash reserves from its special accounts and administrative agencies.
Government officials say non-tax revenues are a near-term solution and it will be even harder to compile budgets from next year on without a consumption tax hike or deep spending cuts, as welfare costs rise for the fast-ageing population.
Highlighting the debt woes, the government estimated the primary budget deficit -- a measure of how it finances policy-related spending without issuing debt -- at 22.7 trillion yen, only a slight improvement from this year.
Japan's public debt is expected to reach 891 trillion yen, or 184 percent of GDP, at the end of March 2012, the finance ministry said, the highest among developed nations.
Caught between its earlier pledges to support people's livelihoods to boost growth and the reality of securing sources of revenue, the government has already scaled back its key spending programmes including child care payouts to households.
The Democrats can push the budget through parliament with their majority in the more powerful lower house, and a rule that allows the budget to become law after 30 days even if the opposition-controlled upper house votes it down.
But in order to fully implement the budget from the start of the next fiscal year on April 1, the government needs so-called enabling bills, such as one on issuing deficit-financing bonds, which need to be approved by both houses of parliament.
Without such enabling bills, the government could not secure 44 percent of its budget revenue, finance ministry officials said.
The initial budget may not be the final say.
If the economy slows, the government could announce extra budgets. It presented one such budget this year, although policymakers may have little leeway for pump-priming given the large fiscal debt burden.
The following breakdown shows initial budget figures for the coming fiscal year and the current year ending next March. (Figures in billion yen, changes in percent):
FY 11/12 FY 10/11 CHANGE TOTAL *92,411.6 92,299.2 ( +0.1) -------------------------------------------------------- REVENUES Tax revenues 40,927.0 37,396.0 ( +9.4) Non-tax revenues 7,186.6 *10,600.2 (-32.2) Government bonds 44,298.0 *44,303.0 ( -0.0) -------------------------------------------------------- SPENDING Debt servicing 21,549.1 20,649.1 ( +4.4) Policy spending 70,862.5 70,931.9 ( -0.1)
Tax grants to local govts 16,784.5 *17,477.7 ( -4.0)
Social security costs *28,707.9 27,268.6 ( +5.3) -------------------------------------------------------- *Asterisk shows figures are biggest on record for initial budget ($1=82.96 Yen) (Reporting by Tetsushi Kajimoto; Editing by Edmund Klamann)
