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🌏 | B, pay foreign currency-denominated government bonds in rubles


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B, pay foreign currency-denominated government bonds in rubles

 
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Additional spending to fill the budget deficit follows NWF's support of billions of rubles for sanctioned state-owned enterprises such as Russian Railways and Aeroflot Airlines.
 

[Reuters] – The Russian government pays foreign currency-denominated government bonds in its own currency ruble, and the exchange rate on the day of payment ... → Continue reading

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      Budget deficit

      Budget deficit(Zaisei Akaji)Country,Municipalities Ofrevenue Annual expenditureIt is a state below, and to make up for itPublic debt(Government bond-Local bond) Is issued.Bubble economySince the collapse, Japan's budget deficit and public debt balance have expanded significantly.Such an increase in the budget deficit and the balance of public debt is brought about by sluggish income and increased spending due to the long-term weakness of the economy and the increase in social security costs.

      Japan's budget deficit

      The budget deficit that expanded significantly in the 90s

      Japan's fiscal balance has been in the red since the burst of the bubble economy.National, local, general governmentNational accountsThe (SNA) -based fiscal balance posted a large deficit of 99% of GDP in 7.4.Of the general government, the social security fund has been in the black every year because the premium income of public pensions has exceeded the amount of pension benefits so far.The surplus of the social security fund has been gradually shrinking in recent years, but it was still in the surplus of 99% of GDP in 0.8.Since the surplus of the social security fund is regarded as a reserve for the increase in pension benefits due to the aging of the future, it is not appropriate to deduct it as the budget surplus when looking at the budget deficit of the Japanese government.Therefore, looking at the fiscal balance of the national and local governments excluding the social security fund, it was a deficit of 99% in FY8.2.

      When the fiscal balance is divided into national and local governments, the national fiscal balance has consistently expanded since 97 after the burst of the bubble, except in 92, when the deficit temporarily narrowed due to the consumption tax hike. Continue to do. The national budget deficit in 99 was 6.8% of GDP.

      The amount of government bond issuance reached 97 trillion yen in 18.5, and then greatly exceeded 98 trillion yen in 2000-30 (settlement in each year), and the initial budget for 2001 is expected to be 28.3 trillion yen. There is.The national accounts-based national accounts deficit is based on the general account, and as seen above, the national accounts-based national accounts deficit is the national accounts deficit. It can be said that the national and local fiscal balances continue to have a large budget deficit in both 2000 and 2001.

      Breakdown of budget deficit

      The factors behind the expansion of national and local deficit on a national accounts basis after the burst of the bubble are divided into income and expenditure as follows.From the following examination, it can be confirmed that in the 90s, income remained sluggish mainly due to the decrease in direct tax, while spending continued to increase, resulting in a significant increase in the budget deficit.

      First, on the income side, direct taxes such as corporate tax, which is sensitive to economic trends,GDPIt has decreased significantly in comparison.Such reductions in direct tax include the slump in personal income and corporate income (corporate income) due to the collapse of the bubble, the permanent reduction of income tax due to the tax reform in the fall of 94, the special tax reduction implemented twice in 98, and the implementation after 99. It reflects the income tax and the permanent reduction of corporate tax.The direct tax has decreased in both the national and local governments, but the decrease in the national direct tax is larger.In rural areas, transfer income such as local allocation tax from the national government has increased compared to the time of the bubble (Fig. XNUMX-XNUMX-XNUMX).The difference between the national and local situations is that national income is mainly tax revenue and is greatly affected by the long-term economic downturn and tax cuts, while local income is subject to local allocation tax and subsidies. This is because the weight of earning stable income from the country in the form of money is high.

      On the other hand, in terms of spending, the national public works spending has been maintained at a high level even recently after the increase due to the repeated implementation of economic measures after the burst of the bubble, while the local public works spending has been since the mid-90s. Has been restrained mainly by local independent projects (public works projects that are not subsidized by the national government and are implemented with the own financial resources of local public organizations), and have decreased slightly.Government consumption is increasing in both national and local governments.With regard to relocation spending, national relocation spending has expanded significantly.The increase in national relocation spending is due to (1) payment of local allocation tax and subsidies to local areas, and (2) society to cover social security costs (public pension payments and medical costs) that increase due to aging. This is due to payments to non-general governments such as payments to security funds and (3) financial assistance to the deposit insurance organization for the succession of long-term debt of the former National Railways and the disposal of bankrupt financial institutions.

      National and local long-term debt balances reaching 130% of GDP

      As such budget deficits continue, the balance of long-term debt such as public bonds is increasing.According to the Ministry of Finance (2001), the long-term debt balance of the national and local governments was about 91 trillion yen (about 278% of GDP) at the end of 60, but 99 trillion at the end of 600. It is about yen (about 120% of the same). By the end of 2001, it is expected to reach about 666 trillion yen (about 130% of the previous year).

      Structural deficit level and sustainability of budget deficit

      Circular deficit and structural deficit

      Looking at the budget deficit in relation to the economy, the "circular" part (circular budget deficit) that fluctuates according to the economic ups and downs through the increase and decrease of tax revenue and unemployment benefits, and these "circular" parts are the actual finances. It can be divided into two parts, the "structural" part (structural budget deficit) removed from the balance.In other words, a structural budget deficit means a budget deficit that does not go away when the economy improves.Below, we estimate the budget deficit since the early 90s by dividing it into a cyclical budget deficit and a structural budget deficit, and analyze the factors behind the expansion of the budget deficit.According to it, the following points become clear.

      1. The structural budget deficit has become large due to repeated economic measures and an increase in social security costs. In recent years, more than 99% of the actual budget deficit (7.4% of GDP in 6) is a structural deficit (structural deficit). It is about XNUMX% of GDP).
      2. The cyclical budget deficit increased due to the weakness of the economy in the early 90s after the burst of the bubble economy. In the mid-90s, it improved a little with the economic recovery, but the deficit expanded again from 97, and it became a deficit of about 98% of GDP in 2000-0.8.
      3. In 2001, the structural budget deficit continued to be large.If the economic growth rate in 2001 is XNUMX% in real terms and -XNUMX% in nominal terms, the cyclical budget deficit has expanded slightly and the automatic economic stabilization function is working.

      In the following, we will take a closer look at these points.

      First, based on the estimation of the output gap in Chapter 90, the fiscal balance of the general government is divided into a cyclical fiscal balance and a structural fiscal balance.According to this, the deficit of both the cyclical fiscal balance and the structural fiscal balance expanded between 93 and 1.6, with the collapse of the bubble economy in between. As a percentage of GDP, the cyclical fiscal balance increased by 0.7% to a deficit of 3.2%, and the structural fiscal balance also increased by 1.5% to a deficit of 94%. After 96, the cyclical budget deficit temporarily decreased due to the economic recovery in 97, but the deficit expanded again in 98 and has remained at about 0.8% of GDP since XNUMX.On the other hand, the structural budget deficit has been on the rise due to the implementation of repeated economic measures including tax cuts and the increase in social security costs (medical expenses, public pension benefits, etc.), and has recently reached about XNUMX% of GDP. It stays high.

      Furthermore, in 2001, while a large structural budget deficit continues, if the economic growth rate is set to XNUMX% in real terms and -XNUMX% in nominal terms, the cyclical deficit will expand slightly.Even if the growth rate assumption is changed by about plus or minus XNUMX%, the estimation result does not change significantly.

      The expansion of the cyclical budget deficit means that the automatic fiscal stabilization function (built-in stabilizer) that reduces tax revenues and increases government spending such as unemployment allowances when the economy deteriorates is working. There is.On the other hand, the expansion of the structural budget deficit reflects discretionary economic policies that expand fiscal spending and tax cuts according to economic conditions. As a result of the government's aggressive implementation of economic measures in response to the economic downturn in the 90s and an increase in social security costs, the cumulative structural budget deficit from 92 to the end of 2001 was approximately 200 trillion yen, and in 2001 It is about XNUMX% of the GDP of.Fiscal policy aimed at supporting the economy in the short term did not eventually lead to sustainable growth, and it is thought that a large structural deficit remained.Even if the Japanese economy returns to its potential growth rate and the cyclical budget deficit disappears, it is expected that a structural deficit of about XNUMX% of GDP will remain unless radical fiscal structural reforms are implemented.In order to achieve fiscal consolidation, it is necessary to take positive measures to reduce the structural deficit, which accounts for the majority of the budget deficit.

      Is the budget deficit sustainable?

      In order for the government to spend more than revenue such as tax revenue, it has to borrow money, which will increase the budget deficit.Since most of the debt to cover the budget deficit is raised in the market in the form of public debt issuance, the issuing government and the buyer of the public debt are appropriate in the market to carry out fiscal management based on the budget deficit. It is necessary to come to terms with a reasonable price.Long-term interest rates are determined by a variety of factors, but so far, interest rates on long-term government bonds have been at historically low levels, with some confidence in the sustainability of the budget deficit. it is conceivable that.However, in the future, depending on the future budget deficit, the size of the outstanding public debt, and the medium- to long-term fiscal management policy, the possibility that the market will doubt the government's redemption ability, the government bond price will plummet, and the long-term interest rate will skyrocket cannot be ruled out. ..

      As one measure of the sustainability of the budget deficit in the future, it is possible to consider whether or not the fiscal management is such that the ratio of the outstanding amount of public bonds to the nominal GDP will continue to increase and diverge in the future.In order to prevent the debt balance from diverging as a percentage of GDP, it is necessary to keep the growth rate of new debt lower than the growth rate of nominal GDP for the current year.This can be achieved by setting the primary balance described below to zero (equilibrium) or surplus, given the assumption that the nominal interest rate and the nominal GDP growth rate are equal.

      The primary balance (primary balance) is the fiscal balance obtained by subtracting "expenditures excluding principal and interest payments on past borrowings" from "revenues such as tax revenues excluding borrowings".If the primary balance is in equilibrium, it means that expenses other than the principal and interest payments of past debts are covered by tax revenues and do not rely on new debts.In other words, one year's new debt is used only to pay the principal and interest of past debt.If the nominal economic growth rate and the nominal interest rate continue to be equal, maintaining the primary balance equilibrium will keep the debt-to-GDP ratio at the current level and indefinitely diverge government debt. Can be avoided.

      The total primary balance of the national and local governments on a national accounts basis has been in the red since 92, and the deficit is on the rise, reaching a deficit of about 99% of GDP in 99 (). FIG. 8.2-90-90).As mentioned above, the national and local budget deficits (% of GDP) were XNUMX% in FYXNUMX. Throughout the XNUMXs, net interest payments remained stable at about XNUMX-XNUMX% of GDP, but the primary balance deficit has expanded due to the decline in tax revenues and the increase in expenditures.Interest payments were stable in the XNUMXs because the debt balance increased, but the nominal interest rate fell during this period.

      Furthermore, since 98, the level of long-term interest rates has stabilized at a low level (about XNUMX to XNUMX%), while the nominal GDP growth rate has been negative, and long-term interest rates have exceeded the growth rate. Even if the primary balance is balanced, the debt balance as a percentage of GDP is increasing.

      Fiscal spending and tax burden by region

      Benefits and burdens of administrative services

      Since the 90s, tax revenues have been sluggish, while fiscal spending has been on the rise, resulting in an increase in national and local budget deficits.What are the characteristics of such national and local fiscal spending and tax revenue trends by region?For the residents of each region, the financial expenditures of the national and local governments are considered to be the "benefits" of administrative services, and the tax burden of national and local taxes is considered to be the "burden" of receiving administrative services.Below, we quantitatively analyze the benefits and burdens per inhabitant for each of the 47 prefectures.

      Measurement of benefits and burdens of local residents

      The method of analysis is as follows.First, the amount of fiscal expenditure spent on each region by the government activities carried out by the national and local governments was estimated as the "benefits" from the administrative services received by the local residents.On the other hand, the taxes, royalties and contributions paid by local residents to the national and local governments were estimated as the "burden" of administrative services.Regarding national taxes, due to restrictions on the tax collection system, it is not possible to accurately grasp the attribution of tax revenues for each prefecture, and the total amount of individual tax revenues is allocated based on certain assumptions.Based on these estimates, "excess beneficiary" (= "beneficiary"-"burden") and "beneficiary / burden ratio" (= "beneficiary" ÷ "burden") were calculated.The analysis is conducted by region of 47 prefectures, and the benefits and burdens per capita are used from the viewpoint of comparing between different prefectures.The target period of the analysis was 80 points in 85, 90, 95, 98, and 20, and we examined how the relationship between benefits and burdens in each region has changed over the past XNUMX years.

      When interpreting the analysis results here, it is necessary to keep the following points in mind.First, economies of scale work among administrative services to provide the same level of services in densely populated metropolitan areas at a lower cost per inhabitant than in rural areas. May be possible.Regarding such administrative services, even if residents in metropolitan areas and residents in rural areas benefit from the same services, the per capita beneficiary amount estimated here is higher in metropolitan areas. Is smaller thanSecond, industrial waste treatment plants, power plants, and dams as water sources located in rural areas bring great benefits to residents of metropolitan areas, but here the benefits and burdens in that sense. Is not considered.Third, national and local revenues include taxes, royalties and contributions, as well as various incomes such as public debt and property income, and carryforwards from the previous year. It is not recorded as a "burden" here.Therefore, it should be noted that the benefits tend to outweigh the burden on a nationwide basis.

      Benefits and burden trends

      Benefits in 98PrefecturesSeparately, the ratio between the average of the five prefectures with the largest beneficiary amount (120 million yen) and the average of the five prefectures with the smallest beneficiary amount (76 yen) is 1.6 times.Next, looking at the burden amount by prefecture, the ratio between the average of the five prefectures with the largest burden (86 yen) and the average of the five prefectures with the smallest burden (52 yen) is 1.7 times.

      Furthermore, looking at the amount of excess beneficiary (= beneficiary-burden) by prefecture, the average of the top 63 prefectures is 47 yen, and 45 out of XNUMX prefectures are positive.Only two organizations have a negative excess of beneficiary, that is, an excess of burden that is more burdensome than beneficiary.

      Moreover, in metropolitan areas with high population density, the administrative cost per capita is cheaper due to economies of scale, while in areas with low population density it is more expensive, so overall, the prefectural income per capita is high. The higher the area, the less the beneficiary and the heavier the burden. Therefore, the excess beneficiary (= beneficiary-burden), which is the deduction between the two, tends to be less.

      Trends in regional variations in beneficiaries and burdens

      Next, let's look at how the relationship between beneficiaries and burdens in each region has changed over the past 20 years by the beneficiary / burden ratio (= beneficiary / burden).

      First, looking at the movement of the national average beneficiary / burden ratio, it decreased by 80 points from 90 to 37.0 during the bubble, reflecting the trend of the fiscal balance of the national and local governments, but in the 90s. On the contrary, it has increased by 33.9 points. The reason why the beneficiary / burden ratio rose sharply in the 90s was that while the burden decreased due to the sharp drop in tax revenues centered on national taxes, the increase in expenditures by local governments due to successive economic measures and the government This is because the beneficiary amount increased significantly by 24.4% due to the increase in financial transfer to local areas.

      Next, looking at this by region, it can be seen that the variability between beneficiaries and burdens between regions widened in the 90s.Let's compare the movements of the five groups with high beneficiary / burden ratios and the five groups with low beneficiary / burden ratios.An organization with a high beneficiary / burden ratio is an area with a relatively low income per capita, and an organization with a low beneficiary / burden ratio is an area with a high income per capita.

      In the 80s, the beneficiary / burden ratios of both groups declined, but the rate of decline of the five groups with relatively high beneficiary / burden ratios was large. In the 90s, the beneficiary / burden ratio of the five groups with high beneficiary / burden ratios increased significantly, while the increase in the beneficiary / burden ratio of the five groups with low beneficiary / burden ratios was modest in the 90s. In the latter half (95-98), it remained almost unchanged.

      Furthermore, let's see whether such widespread variability between regions was caused by either the beneficiary or the burden.Among the five groups with high beneficiary / burden ratios, the burden decreased in the 90s, while the growth of beneficiaries remained at almost the same level as in the 80s.On the other hand, in the five groups with low beneficiary / burden ratios, the growth of beneficiaries also decreased significantly as the growth of burdens decreased, and it became negative in the latter half of the 90s.For this reason, among the five groups with high beneficiary / burden ratios and the five groups with low beneficiary / burden ratios, the widespread variation between beneficiary / burden regions in the 90s was due to the five groups with high beneficiary / burden ratios. It can be seen that this is because the growth of beneficiaries in Japan was high.

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