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TOKYO, Dec 20 (Reuters): Japan plans to cut spending on defence and overseas aid in the budget for the year starting in April as part of efforts to achieve fiscal soundness, the Ministry of Finance (MOF) said on Wednesday.
Japan's defence spending in the general account budget will fall by 0.3 percent to 4.798 trillion yen ($40.7 billion) in fiscal 2007/08 from this year's 4.814 trillion yen, according to a draft budget from the Ministry of Finance.
While including measures such as rationalising equipment procurement in a bid to trim costs, the budget draft boosts spending for responding to regional security risks and possible terrorist attacks.
Money for ballistic missile defence systems will increase sharply by 30.5 percent from the current year to 182.6 billion yen because of rising threats from North Korea, a finance ministry official said. North Korea test-fired a series of missiles in July and tested a nuclear device in October.
Spending for guarding against possible terrorist and guerrilla attacks will rise 9.2 percent to 81.1 billion yen.
The draft budget also earmarks 7.2 billion yen for a planned relocation of U.S. troops from Japan to Guam.
Most of the budget negotiations were held before parliament passed bills last week to upgrade the Defence Agency to a full-fledged ministry next year.
The change in the ministry's status will enable it to take direct charge of requesting the annual military budget.
Japan's defence spending is around the world's fourth highest after the United States, China and Russia.
But Japan's pacifist constitution, which renounces the right to war as a means of settling international disputes, restricts its military forces to a relatively low profile at home and abroad.
The draft also showed the general account budget for official development assistance (ODA) will decline 4 percent from this year to 729.3 billion yen, the lowest since fiscal year 1988/89.
The ODA general account budget has been on a downward trend since it hit a peak of 1.17 trillion yen in fiscal 1997/98. It has been cut every year since 2000/01 as the government tries to curb Japan's mountain of public debt.
Outstanding public debt is expected to rise to around 773 trillion yen ($6.5 trillion) by the end of next fiscal year. That would be around 148 percent of GDP, by far the highest among industrialised countries.
But a MOF official said Japan is on course to achieve its self-imposed goal of increasing net overseas aid by $10 billion over the five years to 2009.
Net ODA spending, a standard for an international comparison that includes general account spending as well as other overseas aid such as yen loans from the Fiscal Investment and Loan Programme, totalled around $13.15 billion in calendar 2005, up from $8.9 billion in 2004.
The MOF's blueprint of the budget, totalling 82.91 trillion yen, goes through last-minute negotiations among ministries this week and will be made into an official government draft after minor modifications.
The final draft is expected to be approved by the cabinet on Dec. 24 and will be submitted to parliament early next year.
($1=117.92 Yen)
(Additional reporting by Hideyuki Sano)
