BUDGET ESTIMATES FOR THE 1940-41 FISCAL YEAR
DEPARTMENT OF FINANCE
WHEN the new Cabinet was formed under the leadership of Admiral Yonai during the new year recess of the Imperial Diet, public interest was aroused, in no small measure, as to how matters concerning the budget estimates would be disposed of. The Yonai Cabinet, however, lost no time in deciding to adopt the estimates drafted by its predecessor, the Abe Cabinet, after thorough examination and study, and to introduce them to the Diet. The 1940-41 estimates now being deliberated on, therefore, are those decided on by the Abe Cabinet, in respect to the General Expenditures, on December 8, 1939, and in respect to the Emergency Military Expenditures, on January 6, 1940.
In presenting an outline of the 1940-41 budget estimates, however, the 3rd supplementary budget for the Special Account for Emergency Military Expenditures will also be taken up from time to time, since it is inseparably related to the general budget.
Principles Adopted in Compiling the Budget
The principles on which the budget for the next fiscal year was formulated was originally established by the Hiranuma Cabinet, on July 4, 1939. When the Abe Cabinet succeeded to that of Baron Hiranuma, it was decided to adhere to the same principles, the major points of which are as follows:
1. In respect to demands for appropriations to cover new undertakings, special attention shall be paid to the selection of items so as to limit such demands only to those that are really essential and urgent in view of the current situation. At the same time, the size of the appropriations to meet such demands shall be kept to the minimum.
2. A close re-examination shall be made of the appropriations intended to cover undertakings already authorized, with a view to exercising further economies by such means as the lowering of standards, the increasing of efficiency, and the postponement of new enterprises.
3. Particular care shall be taken for the maintenance of harmony with the various economic policies concerning materials, labour,
funds and prices, lest the operation of the wartime economy be hampered.
4. The taxation system shall be revised with the object of increasing tax receipts, while at the same time efforts shall be made to obtain more revenue from other ordinary items. Further, means shall be devised for transferring as much as is feasible from the various special accounts to the Special Account for Emergency Military Expenditures or the General account.
5. Statements of the budget estimates of all the Departments shall be submitted to the Department of Finance not later than August 10, 1939, in the case of the General Account and by August 31, the same year, in the case of the special accounts.
Briefly, principles adopted in compiling the 1940-41 estimates have been to aim at (1) increase in ordinary revenue, and (2) at curtailment of expenditures, with a view to working out the most adequate wartime budget. Another important point to be noted is that the Department of Finance, deliberating on the estimates for the General Account, had always to take them up along with the requirements of the Emergency Militaty Expenditures, in order to get a comprehensive picture of the supply and demand of materials and other related matters. The procedure for drafting the 1940-41 estimates was naturally very complicated; but the fact that the Cabinet was able to render a decision on this matter with such smoothness and dispatch, was a source of gratification to the authorities concerned.
Estimates for the General Account
The following is an outline of the 1940-41 budget which was formed under the circumstances described above.
The 1940-41 budget estimates for the General Account are as follows:
(In 1,000 yen)
| Revenue | Expenditures | |
|---|---|---|
| Ordinary | 3,345,116 | 2,662,709 |
| Extraordinary | 2,477,845 | 3,160,253 |
| — Normal revenue | 731,667 | |
| — Receipts from the issue of public loans | 1,671,177 | |
| — Surplus brought forward from the previous fiscal year | 75,000 | |
| Total | 5,822,962 | 5,822,962 |
A comparison of the 1940-41 estimates with the expenditures as included in the budget for the preceding fiscal year is given below:
COMPARISON BETWEEN ESTIMATES FOR THE 1940-41 AND 1939-40 EXPENDITURES
(In 1,000 yen)
| 1940-41 | 1939-40 | Increase | |
|---|---|---|---|
| Ordinary | 2,662,708 | 2,069,479 | 593,229 |
| Extraordinary | 3,160,252 | 2,735,063 | 425,189 |
| Total | 5,822,961 | 4,804,543 | 1,018,418 |
The following table shows the figures for the 1940-41 expenditures classified according to Departments:
(In 1,000 yen)
| Departments | Ordinary | Extraordinary | Total |
|---|---|---|---|
| Imperial Household | 4,500 | — | 4,500 |
| Foreign Affairs | 23,605 | 40,474 | 64,079 |
| Home | 336,860 | 173,954 | 510,815 |
| Finance | 1,097,925 | 724,311 | 1,822,236 |
| War | 182,019 | 1,092,761 | 1,274,781 |
| Navy | 351,298 | 677,646 | 1,028,945 |
| Justice | 51,536 | 5,565 | 57,101 |
| Education | 159,121 | 27,540 | 186,662 |
| Agriculture and Forestry | 62,035 | 148,397 | 210,433 |
| Commerce and Industry | 9,412 | 80,526 | 89,939 |
| Communications | 297,174 | 70,057 | 367,232 |
| Overseas | 2,950 | 52,893 | 55,843 |
| Welfare | 84,267 | 66,123 | 150,391 |
| Total | 2,662,709 | 3,160,253 | 5,822,962 |
Important new items of the 1940-41 expenditures are enumerated below:
(In 1,000 yen)
| Item | Amount |
|---|---|
| Expenses relative to the repletion of armaments | 970,390 |
| Expenses relative to the aid and protection of men in the fighting services | 89,776 |
| Expenses relative to the expansion of productive power | 114,146 |
| Expenses relative to economic control | 26,431 |
| Expenses relative to the promotion of foreign trade | 16,468 |
| Expenses relative to the promotion of shipping | 11,774 |
| Expenses relative to the encouragement of civil aviation | 15,980 |
| Expenses relative to the settlers in Manchuria | 35,848 |
In addition to the afore-mentioned items, a Special Account for Taxes to be Allocated to Local Governments and Municipalities as revenue has been created to replace the Special Grants to Local Finances which will be abolished when a reform of the local taxation system is carried out. The taxes to be allocated to local
governments and municipalities, excepting those collected direct, in the said Special Account, are to be transferred from the General Account to the Special Account. Accordingly, a sum of 277,355,000 yen has been included in the general expenditures.
Again, a total of 600,000,000 yen out of the estimated increases in tax receipts on the basis of the taxation reform carried out since the 1938-39 fiscal year and in estimated profits to be gained by the Monopoly Bureau by the raising of tobacco prices, etc. has been earmarked for transfer to the Special Account for Emergency Military Expenditures. The two items of transfer referred to above, namely those relating to taxes to be allocated to prefectures and municipalities and those relating to emergency military expenditures, are both what may be termed transit accounts. If these are excluded, total expenditures will come to 4,945,606,000 yen instead of 5,822,962,000 yen.
Much effort has also been directed toward curtailing expenditures previously authorized for various undertakings. Accordingly, such undertakings as require key commodities will be deferred wherever possible, to say nothing of non-essential and non-urgent undertakings, besides the lowering of standards and devising other means of retrenchment.
For purposes of comparison, the estimated revenues of the 1940-41 budget are itemized and shown side by side with the corresponding figures of the previous year:
(In 1,000 yen)
| Sources | 1940-41 Estimated Revenue | Revenue in 1939-40 Budget | Increase or Decrease |
|---|---|---|---|
| Ordinary: | |||
| Taxes | 2,589,900 | 1,948,314 | + 641,585 |
| Stamp receipts | 107,088 | 90,732 | + 16,356 |
| Receipts from Government enterprises and property | 453,998 | 371,977 | + 82,020 |
| Contributed from the Special Account of Communications Services | 81,500 | 81,500 | — |
| Contributed from the Bank of Japan | 27,425 | 15,676 | + 11,749 |
| Miscellaneous receipts | 77,763 | 65,287 | + 12,476 |
| Transferred from the Special Account of Funds for Educational Improvement and for promotion of farm villages | 7,439 | 6,926 | + 512 |
| Total ordinary revenues | 3,345,116 | 2,580,415 | + 764,701 |
(Table continued from p. 336.)
| Sources | 1940-41 Estimated Revenue | Revenue in 1939-40 Budget | Increase or Decrease |
|---|---|---|---|
| Extraordinary: | |||
| Extra Profit Tax | 557,463 | 297,313 | + 260,150 |
| Proceeds of sales of Government property | 8,937 | 7,192 | + 1,745 |
| Contributed from public bodies to expenses for public works | 7,548 | 7,288 | + 259 |
| Shares of public bodies in expenses for public works | 11,957 | 9,049 | + 2,907 |
| Receipts in Encouragement Fund for Scientific Research | 25 | 33 | − 8 |
| Transferred from Special Accounts | 8,071 | 7,955 | + 116 |
| Contributed by insurance companies | 3,352 | 3,352 | — |
| Receipts in Compensation Funds | 3,888 | 5,584 | − 1,695 |
| Receipts in ordinary sources from Special Accounts | 6,700 | 6,700 | — |
| Miscellaneous receipts | 123,722 | 67,765 | + 55,957 |
| Receipts from the issue of public loans | 1,671,177 | 1,727,732 | − 56,554 |
| Surplus brought forward from the previous fiscal year | 75,000 | 84,160 | − 9,160 |
| Total extraordinary revenues | 2,477,845 | 2,224,127 | + 253,717 |
| Total revenues | 5,822,962 | 4,804,543 | + 1,018,418 |
As is clear from the foregoing table, the greater part of the estimated increases of normal revenue is accounted for by an estimated increase in tax receipts, an increase which is based on the proposed taxation reform. It should be noticed in this connection, that the proposed taxation reform is to realize the equitable distribution of the tax burden, to try to harmonize the taxation system with the various economic measures to be carried out by the Government, and to plan for an increase in tax receipts, as well as to render the tax system as elastic and as simple as possible. The following figures represent an increase or decrease in the estimated receipts from various taxes for the 1940-41 fiscal year:
ESTIMATED INCREASE OR DECREASE IN 1940-41 RECEIPTS FROM TAXES
(In 1,000 yen)
| Tax | Change |
|---|---|
| Income tax | + 220,703 |
| Tax on juridical persons | + 264,871 |
| Special tax on juridical persons | + 313 |
| Land tax | − 45,244 |
(Table continued from p. 337.)
| Tax | Change |
|---|---|
| Business profit tax | − 90,510 |
| Interest tax on capital | − 42,723 |
| Capital tax on juridical persons | − 15,407 |
| Special tax on dividend and interest | + 20,123 |
| Tax on dividend | − 46,764 |
| Interest tax on public bonds and company debentures | − 1,436 |
| Special tax on foreign currency bonds | + 9,388 |
| Inheritance tax | + 1,384 |
| Mining tax | − 4,145 |
| Saké tax | + 83,134 |
| Tax on soft drinks | + 2,143 |
| Sugar excise | + 20,474 |
| Textile consumption tax | + 10,071 |
| Tax on volatile oil | + 11,746 |
| Commodity tax | − 28,952 |
| Tax on entertainments, food and drink | + 53,778 |
| Exchange tax | + 3,943 |
| Transit duty | + 7,233 |
| Admittance tax | + 6,878 |
| Extra profit tax | + 86,514 |
| Total | + 527,519 |
In addition, the taxation reform is to bring about an estimated increase of 581,000 yen in stamp receipts. Furthermore, receipts from taxes coming under the Special Account for Taxes to be Allocated to Local Governments and Municipalities are estimated at 76,565,000 yen, including 25,990,000 in land tax, 50,575,000 in business tax, 20,078,000 in business tax on juridical persons and 30,496,000 in business tax on individuals. Thus, these increased tax receipts are estimated to reach 604,665,000 yen.
The major increases in the normal revenue other than receipts from taxes are revenue derivable from such Government enterprises and property as state forests and the profits accruing to the Monopoly Bureau.
The following table shows the public bond issues to be assigned as sources of revenue to meet the estimates for the 1940-41 expenditures:
PUBLIC BOND ISSUES
(In 1,000 yen)
| Bond | Amount |
|---|---|
| Earthquake Reconstruction Bonds | 2,515 |
| Highway Bonds | 13,669 |
| Deficit Bonds | 1,654,993 |
| Total | 1,671,177 |
Special Accounts
There are 42 special accounts now in operation, including the Special Account for Emergency Military Expenditures and the Special Account for Emergency War Materials Funds. In the 1940-41 fiscal year, this number is to be increased to 47 by the creation of the following special accounts: Government Investments, Army Aeronautical Arsenal Funds, Health Insurance for Salaried People, Seamen's Insurance, and Taxes to be Allocated to Local Governments and Municipalities. The more important Special Accounts, together with their revenue and expenditures are tabulated below:
(In 1,000 yen)
| Account | Ordinary | Extraordinary | Total | |
|---|---|---|---|---|
| Government-General of Chosen | Revenue | 550,728 | 287,058 | 837,786 |
| Expenditure | 418,678 | 419,107 | 837,786 | |
| Government-General of Taiwan | Revenue | 214,793 | 45,736 | 260,530 |
| Expenditure | 157,240 | 103,289 | 260,530 | |
| Bureau of the Kwantung Leased Territory | Revenue | 27,836 | 28,882 | 56,719 |
| Expenditure | 25,835 | 30,884 | 56,719 | |
| Government of Karafuto | Revenue | 54,930 | 2,965 | 57,895 |
| Expenditure | 27,932 | 29,713 | 57,645 | |
| Government of the South Sea Islands | Revenue | 12,771 | 454 | 13,225 |
| Expenditure | 5,770 | 7,455 | 13,225 | |
| Imperial Railways (Capital account) | Revenue | — | — | 355,259 |
| Expenditure | — | — | 355,259 | |
| Communications Services (Capital account) | Revenue | — | — | 83,006 |
| Expenditure | — | — | 83,006 |
The estimates for the various special accounts were also drawn up on the same principles as those governing the formulation of the estimates for the General Account. The following table shows the amounts to be transferred from the various special accounts to the Special Account for Emergency Military Expenditures in the 1940-41 fiscal year:
(In 1,000 yen)
| Transferred from the Special Account of | Amount |
|---|---|
| Government-General of Chosen | 50,481 |
| Government-General of Taiwan | 23,362 |
| Bureau of the Kwantung Leased Territory | 12,960 |
| Government of Karafuto | 6,776 |
| Imperial Railways | 50,000 |
| Communications Services | 17,000 |
| Total | 160,581 |
The above figures represent an increase of 33,148,000 yen when compared with the previous fiscal year. As in the 1939-40 fiscal year, a sum of 700,000 yen is to be transferred from the Special Account for the Government of the South Sea Islands to the General Account. The issues of public bonds as included in the various Special Accounts for the 1940-41 fiscal year are shown below:
(In 1,000 yen)
| Special Accounts | Amount |
|---|---|
| Government-General of Chosen | 199,500 |
| Government-General of Taiwan | 6,000 |
| Imperial Railways | 62,000 |
| Communications Services | 20,000 |
| Government Investments | 150,299 |
| Total | 437,799 |
Emergency Military Expenditures
Lastly, the revenue and expenditures in the third supplementary budget for the Special Account for Emergency Military Expenditures are as follows:
(In 1,000 yen)
| Item | Amount |
|---|---|
| Expenditures: | |
| Emergency Military Expenditures for the Army | 2,973,000 |
| Emergency Expenditures for the Navy | 737,000 |
| Reserves | 750,000 |
| Total expenditures | 4,460,000 |
| Revenue: | |
| Receipts from the issue of public bonds | 3,673,872 |
| Transferred from other accounts | 760,581 |
| Others | 25,545 |
| Total revenue | 4,460,000 |
The item "transferred from other accounts" comprises 600,000,000 yen transferred from the General Account and 160,581,000 yen
transferred from Special Accounts. The item "receipts from the issue of public bonds" represents the amount to be raised by the issuance of China Affair Bonds during the 1940-41 fiscal year. When the bonb [sic] issues in the General Account amounting to 1,671,177,000 yen and those in the various special accounts amounting to 437,799,000 yen are included, the aggregate bond issues scheduled for the 1940-41 fiscal year comes to 5,782,850,000 yen, a decrease of 142,620,000 yen, when compared with the previous fiscal year.
The estimates for the third supplementary budget for the Special Account for Emergency Military Expenditures and those for the General Account add up to 10,282,962,000 yen. If, however, the transit accounts, amounting to 877,355,000 yen, are deducted, the sum total will be 9,405,606,000 yen.