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The Japanese cabinet just approved a record budget for next fiscal year to deal with the pandemic and revive the economy.
Japan’s Finance Ministry’s announcement today said total budget spending would increase by 3.8% to 106.6 billion yen ($ 1 billion) for the next fiscal year. Spending on social security will represent about 54%. The country will also set aside some money to pay off debt and support local governments.
Earlier this month, Prime Minister Yoshihide Suga also announced a stimulus package of more than $ 700 billion. Part of the funding for this package will come from next year’s budget. This stimulus package aims to curb the epidemic and support the economic transition to the post-Covid period.
Japanese Prime Minister Yoshihide Suga during a press conference in Tokyo on December 4. Image: Reuters
The first goal is now critical, as the number of new infections in Japan has already surpassed the record 3,000 cases per day. Tokyo alone registered more than 700 cases last Saturday. Prime Minister Suga was forced to announce the suspension of the tourist assistance program he once promoted. This cost him an effective tool to stimulate the economy that was being warned of a recession.
To cope with the pandemic, Japan is raising the mountain of debt that is already the largest of the group of developed countries. Although health and pension costs have risen steadily due to the aging population, Covid-19 forced the government to accelerate the issuance of new debt to a record this year.
Last week, the Central Bank of Japan announced that it would continue to maintain its super-relaxed monetary policy stance and extend the pandemic response program for another 6 months. This agency also surprised the market by committing to reconsider but will not completely reform the policies. This forces economists and investors to continue speculating on possible changes.
Regarding budget revenue next year, Japan plans to continue issuing bonds. The Japanese government also does not expect the budget to balance in this decade.
Ha Thu (theo Bloomberg)
