Despite dissent within the ranks of his Democratic Party of Japan and Cabinet, Prime Minister Naoto Kan's administration endorsed on Tuesday a 10 percent cut on all ministries' fiscal 2011 budget requests and earmark at least ¥1 trillion to stimulate economic growth.
The approved guideline, which ministries will use when they compile their budget requests, caps annual policy-related spending at ¥71 trillion, as previously pledged by Kan. The Cabinet also agreed to hold open debate on which projects deserve a share of the ¥1 trillion.
The challenge for Kan is to curb government spending while also providing sufficient stimulus for the weak economy. The fiscal hawk has said corralling the soaring public debt is inevitable to avoid a financial crisis similar to what Greece has been going through.