Japan's Prime Minister Zenko Suzuki yesterday declared a "state of emergency" in the nation's finances and said the government had no alternative but to resort to issuing bonds to cover a huge budget deficit.
Suzuki apologized to the nation for the switch in policy. The prime minister had committed himself to "reconstructing" the nation's finances by fiscal 1984 without either raising taxes or floating additional bonds. But lower-than-expected tax revenues have caused him to reconsider, he said.
The government had a $9.5 billion shortfall in tax revenues in fiscal 1981 and is expected to run a $19 billion to $23 billion shortfall in the current fiscal year.
Suzuki therefore sketched a modest turnaround, announcing that the government will float additional bonds worth more than $11 billion to cover the fiscal 1982 deficit.
The prime minister blamed the unexpectedly large revenue shortfall on the protracted global economic slump in the aftermath of two oil crises, which have slowed Japan's economic growth.
Despite the announcement of the "state of emergency," Japan has the highest rate of savings in relation to gross national product in the world and, at 2.4 percent, one of the lowest rates of unemployment.