Japanese Prime Minister Fumio Kishida’s cabinet on Friday approved a record $ 940 billion budget for the next fiscal year as the COVID-19 responses increased the cost of helping an aging population and rising military spending to tackle China.
The budget of 107.6 trillion yen (941.55 billion yen)
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The first Kishida annual budget comes after Parliament approves yen 36 trillion of additional stimulus spending for that fiscal year to aid the recovery from COVID-19.
However, there is still limited scope for spending in growth areas such as green and digital transformation.
The budget includes yen 5 trillion to cover the emergency costs of COVID-19, a record defense expense of yen 5.37 trillion, the highest ever social cost of yen 36.3 trillion and yen 24.3 trillion in debt servicing. Japan’s national debt is twice that of its economy at $ 5 trillion, the highest among developed countries.
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Kishida has pledged to improve Japan’s public finances over the long term, and the budget for the next fiscal year is 36.9 trillion yen, less than the 43.6 trillion yen originally planned for this year.
Lower borrowing will be replaced by higher tax revenues, rising to a record 65.2 trillion yen for the first time in two years as COVID-19 restrictions on economic activity are eased.
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For the budget year 2022/23, the government estimates real economic growth of 3.2%, after an earlier estimate of 2.2%, which forms the basis for budget planning.
However, with debt still accounting for 34.3% of the budget, it will remain difficult to achieve a primary budget surplus by fiscal year 2025/26, as the government is aiming for.
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The primary budget deficit – excluding new bond sales and debt servicing – will be 13 trillion yen in FY 2022/23, improving from 20 trillion yen this year, but still far from the government’s target.
($ 1 = 114,2800 yen)
(Reporting by Tetsushi Kajimoto; Editing by Catherine Evans)