Japan has compiled another record initial budget for the upcoming fiscal year, adding to the developed world’s heaviest debt pile.
(Bloomberg) — Japan has compiled another record initial budget for the upcoming fiscal year, adding to the developed world’s heaviest debt pile.
The budget for the year beginning in April will be around 114.4 trillion yen ($867 billion), increasing from 107.6 trillion yen in the current year, according to documents obtained by Bloomberg Thursday. The biggest portion will be spent on social security costs, the plan showed.
Another key item on the outlay list is about 6.8 trillion yen of defense spending, jumping from the current year’s 5.4 trillion yen. The defense costs, which will account for around 6% of the total expenditures, have been at the center of debate at the ruling party.
The official announcement of the figures is expected Friday.
A breakdown of projected expenditures:
- Around 72.7 trillion yen in general spending
- About 36.9 trillion yen for social security
- Roughly 6.8 trillion yen for defense
- Debt servicing of around 25.3 trillion yen
- Around 16.4 trillion yen in transfers to regional and local governments.
On the revenue front, Japan sees a record roughly 69.4 trillion yen tax income, up from this year’s 65.2 trillion yen, hinting at the country’s recovery from the pandemic.
To cover most of the rest of the expenses, the government expects about 35.6 trillion yen of funding from bonds, according to the documents. Although the amount slightly declined from this year’s 36.9 trillion yen, it still means that the indebted nation needs to borrow more than 30% of the funds it needs to finance the budget.
Initial budgets tend to show only part of the books for the next fiscal year, given the likelihood of additional budgets. In the current year, Japan has implemented two extra budgets under Prime Minister Fumio Kishida’s leadership.
Japan’s government debt reached a record 264% of its gross domestic product this year, the International Monetary Fund’s data showed. Even with the Bank of Japan’s current rock-bottom interest rates, the country will need to spend around 25.3 trillion yen next year to service the debt.
Meanwhile, government officials have maintained that they will continue seeking to balance the budget excluding debt-servicing costs by fiscal 2025.
–With assistance from Emi Urabe and Yuki Hagiwara.
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