Tokyo: The Japanese government is planning nearly $800 billion of record spending in the next fiscal year to shore up a fragile economy, with Tokyo also promising to rein in a bulging debt burden in an expansionary budget set to be unveiled this week.
Finance minister Taro Aso on Tuesday vowed to boost growth and achieve fiscal reform with government budget spending worth 96.7 trillion yen ($797.53 billion) for the next fiscal year that starts in April. This is up a touch from the 96.3 trillion yen spending set for the current year’s initial budget.
Confirming figures reported by Reuters last week, Aso said tax revenue is estimated at a 25-year high of 57.6 trillion yen in fiscal 2016.
That revenue assumption, based on an expected economic growth of nominal 3.1% and real 1.7%, will allow the government to slash new bond issuance by 2.4 trillion yen from this year to 34.4 trillion yen, he said.
The budget plans signal a growing commitment by Prime Minister Shinzo Abe to rein in the industrial world’s heaviest debt burden even as he continues to pump-prime the economy via a cocktail of expansionary policies.
“This budget is appropriate for marking the first step towards our new fiscal plan while we aim for economic revival and fiscal consolidation at the same time," Aso told reporters after he presented the budget figures at a meeting between government officials and ruling party lawmakers.
Aso said the government is making a progress towards achieving a primary budget surplus - excluding new bond sales and debt servicing - by the fiscal year ending March 2021.
The decreasing level of new borrowing and rising tax income on the back of corporate profits will bring Japan’s fiscal dependence on bond financing to 35.6% in fiscal 2016 - the lowest since fiscal 2008, just before the global financial crisis dealt a blow to the world’s third largest economy.
Still, the level of bond financing remains relatively high.
“Abe administration has done the utmost to pursue both economic revival and fiscal reform," Abe told the meeting, noting that tax revenue has risen by 15 trillion yen and bond issue has fallen by 10 trillion yen since he took office in late 2012.
“The results were clear. Together with everyone, I want to follow this path with confidence."
The draft budget is expected to be endorsed by the cabinet on Thursday and sent to parliament for approval early next year. Reuters