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TOKYO: Japan’s cabinet approved on Monday (December 21) a record $ 1.03 trillion budget draft for the next fiscal year starting in April 2021, the Finance Ministry said, as the coronavirus and spending stimulus packages put pressure on already desperate public finances.
The annual budget of 106.6 trillion yen (1.03 trillion US dollars) marked a 4% increase from the initial level this year and for nine years in a row, with new debt worth 43.6 trillion yen representing 40.9% of income.
From Europe to the United States, policy makers around the world have unleashed an outbreak of monetary and fiscal stimulus to avoid a deep and prolonged recession, as the pandemic closed international borders and left many out of work.
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In Japan, tax reform has been shelved as Prime Minister Yoshihide Suga prioritized efforts to contain the pandemic and boost growth to prop up tax revenue.
The spending plan, which coincided with a Reuters report released last week, is due to be approved by parliament early next year.
It will be implemented alongside a third additional budget for this fiscal year as a combined 15-month budget earmarked for ongoing spending to ease the pain of the virus and support Suga’s goal of achieving carbon neutrality and digital transformation.
With a public debt more than twice the size of Japan’s $ 5 trillion economy, by far the worst in the industrialized world, tax reform is a more urgent task than other countries.
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The government expects real GDP growth of 4 percent for the next fiscal year, more optimistic than economists’ prediction of 3.4 percent. If the economy falls short of growth estimates, that would erode tax revenue and justify more borrowing to fill a budget gap.
The government’s fiscal 2021 primary budget deficit, excluding sales of new bonds and debt service, is estimated at 20.4 trillion yen, more than double this year’s initial estimates, bringing the target of budget balance is even more difficult to achieve.
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