The government's budget deficit continues to swell at an ominous pace. According to an estimate by the Finance Ministry, the total amount of bond issues in fiscal 2004 may exceed 41 trillion yen -- a sum roughly half the size of the budget. The figure could be revised downward, possibly to less than 40 trillion yen, depending on how the budget-making process develops. As things stand, though, bond issuance on the order of 40 trillion yen seems unavoidable.
The widening deficit is a dramatic reminder of how Prime Minister Junichiro Koizumi's budget reform initiative has floundered so far. After taking office in April 2001, he promised to limit new bond sales to 30 trillion yen annually. With the deficit approaching 40 trillion yen, however, that debt ceiling is already a thing of the past.
It is not that the prime minister never kept the promise. In the fiscal 2002 initial budget, debt issuance was in fact limited to 30 trillion yen. But the quick collapse of the ceiling amid falling tax revenues and growing deflationary pressures brought total borrowing for that year to 34 trillion yen. Initial debt issuance scheduled for fiscal 2003 already exceeds 36 trillion yen.