Japan’s cabinet approved a record initial budget for the next fiscal year, piling more borrowing onto the country’s massive debt load.
(Bloomberg) — Japan’s cabinet approved a record initial budget for the next fiscal year, piling more borrowing onto the country’s massive debt load.
For the year starting in April 2023, Prime Minister Fumio Kishida’s cabinet signed off on 114.4 trillion yen ($863 billion) in overall spending, including a jump in defense spending, the finance ministry said Friday. The amount represents a solid 6.3% increase from the previous year’s initial budget.
Next year’s spending may still increase as the year progresses given a tendency for the government to issue extra budgets.
Finance minister Shunichi Suzuki insisted that Japan was still looking to balance its budget outside debt servicing in the fiscal year starting in April 2025, and played down concerns over the defense spending.
“Budget reliance on bond issuance has actually improved from this year,” Suzuki said after the cabinet meeting. “I don’t think defense spending has gone overboard.”
The majority of the budgeted spending will be funded by record tax revenue of 69.4 trillion yen, with some additional funding sources. But the costs will ultimately require another 35.6 trillion yen of borrowing.
The fresh bond issuance edged down from this year’s 36.9 trillion yen, but it still accounts for around one-third of budget funding, adding to the developed world’s heaviest debt load.
Read More: Japan Begins Defense Upgrade With 26% Spending Increase for 2023
On the expenditure side, the largest portion will go to social security needs, followed by debt-servicing costs and transfers to regional and local governments. The ramped-up defense spending amounts to 6.8 trillion yen, with an extra 3.4 trillion yen put aside for a defense fund that will be used in fiscal 2024 onward.
Actual total spending will likely balloon from the initial budget. This year, Prime Minister Fumio Kishida ordered two additional budgets, requiring an extra 25.6 trillion yen of new debt issuance for funding.
(Updates with comments from finance minister)
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