On July 30, the government approved the basic guidelines for Fiscal Year 2027 budget requests at a Cabinet meeting. Because no request upper limit is set for the special quota, conventional terms such as "ceiling" will not be used. In addition, at the Administrative Reform Promotion Council held on the same day, it was decided to abolish what is called "three-year rule," which limits budget measures for new funds to approximately three years. This enables flexible business design.
Under the basic guidelines, first, separately from general expenditures, a "Strong and Prosperous Japan Investment Quota" will be created so that measures leading to raising potential growth rates through domestic investment, including crisis management investment and growth investment, can be implemented with predictability, intensively promoting truly effective measures. In this investment quota, no request upper limit will be set, creating a mechanism allowing necessary amounts to be appropriately requested, including itemized requests without specified amounts.
In addition, budget requests and demands will be made taking into account increases in wages and procurement prices, achieving an accurate reflection of economic and price trends realized from the FY2026 budget during the budget formulation process. Furthermore, departing from dependence on supplementary budgets and budgeting permanent measures in the initial budget, appropriate requests and demands will be enabled while utilizing itemized requests without specified amounts as necessary. For example, regarding discretionary expenditures, requests for up to a 20% increase are possible, and utilization of the special quota as well as itemized requests can also be made.
In the current budget request guidelines, the mechanism allows necessary budget requests to be fully made, and Prime Minister Takaichi emphasized that "there is no longer anything that should be called a ceiling." On top of that, emphasis will be placed not on the amount of fiscal expenditure, but on its effect on economic growth.
Takaichi stated: "In the upcoming budget formulation process, including reviews of subsidies and funds, we will re-examine priorities of measures across all expenditures and boldly prioritize budget contents. As Japan's economy and finances are entering a new phase, under the concept of responsible proactive fiscal policy, we will ensure the transition to a growth-oriented economy while paying full consideration to fiscal sustainability and securing market trust, engaging in appropriate macroeconomic and fiscal management based on the Basic Policy 2026. In advancing the transition to responsible proactive fiscal policy, we will also secure market trust by communicating with the market with high transparency and care. The Takaichi Cabinet will surely accomplish this challenge."
This article has been translated by JST with permission from The Science News Ltd. (https://sci-news.co.jp/). Unauthorized reproduction of the article and photographs is prohibited.