3. Composition of the Budget Public

3. Composition of the Budget

Public Finance Law prescribes the composition of the budget to be submitted to the Diet. The budget consists of general provisions, a revenues and expenditures budget, continued expenses (multi-year expenses), approved carried-over expenses (expenses approved to be carried-over into the following year), and contract authorization.
(1) General provisions
General provisions provide general rules to be commonly applied to all of the individual budget components. Also included in these provisions are the ceilings on the amount of government bonds as well as of Treasury bills and temporary borrowings or of guaranteed loans, and other matters necessary for budget implementation. These provisions form the basic framework of the budget.
(2) Revenues and expenditures budget
The revenues and expenditures budget is the main part of the budget. The revenue section shows the estimate of total national receipts, and does not mean that the government will collect the estimated amount of revenues. The expenditure section is different, however. Expenditures are permitted only when listed in this budget, and the estimated expenditures are basically the upper limits of expenditures for each budget item.
(3) Continued expenses
Continued expenses contain items for which the government makes payments over a period of several years, the maximum period being five years. These payments are for projects in construction, production, and others. Prior Diet approval is required for a continued-expense item, and the Diet specifies the total amount of expenses as well as annual allotments. However, in recent years, continued expenses are used only for the construction of destroyers and submarines of the Defense Agency.
(4) Approved carried-over expenses
The Diet may allow for carried-over expenses that can be used in the subsequent fiscal year. This system covers cases in which an expenditure item is not spent within the current fiscal year, due to the nature of the expenditure or to unexpected circumstances arising after the formulation of the budget. Prior Diet approval is necessary for these carried-over expenses.
(5) Contract authorization
The contract authorization system allows the government to make contracts for projects in which it is necessary to incur a liability within a given fiscal year and make all or part of the outlays in subsequent years. Prior approval of the Diet is needed to incur such a liability. The government must also appropriate actual outlays for the year in its annual budget.