Japan's lower house of Parliament passed the nation's budget Friday, approving a $600 billion plan that could squeeze money out of the economy just as it is careening toward recession.
But the approval Friday also creates a basis for politicians to discuss more openly their long-awaited plans to spend more money to strengthen the economy, which forecasters say is likely to record its worst annual performance in nearly a quarter-century when the fiscal year ends this month.The budget passed Friday symbolizes the austerity that has so antagonized the United States. Recent data show that prices, wages and corporate profits are declining, that business confidence is at a record low and that the economy is expected to register near-zero growth, or possibly shrink, this fiscal year.
Many economists say Japan must spend more on the economy or offer tax cuts to encourage corporate and consumer spending. But Prime Minister Ryutaro Hashimoto and other senior leaders have at least created the impression that they are dithering and say that drastic measures are inappropriate.
The budget is slightly larger than the previous year's, but it will still be a force for contraction, withdrawing as much as $30 billion from the economy, economists say.
The tightening might be felt immediately by construction companies, which may see their orders for new projects drop, as the government's spending on public works declines by 7.8 percent.
That makes the supplementary budget more important, but it could not be openly debated until now.