TOKYO (Reuters) – Japan’s government plans a record-high $1.03 trillion budget for the next fiscal year, boosted by its coronavirus response and rising welfare and military spending, three sources with direct knowledge of the matter told Reuters on Thursday.
The proposed 106.6 trillion-yen budget for the fiscal year beginning in April 2021 will be endorsed by the cabinet on Monday, the sources said. They spoke anonymously because they weren’t authorised to talk to media.
The new budget comes a week after a third extra budget was decided to combat the effects of the coronavirus. Both budgets will be rolled out together as a 15-month budget aimed at seamless spending to help the economy recover from its COVID-19-induced slump.
The budget plan underscored the challenge Japan faced in containing COVID-19 infections and keeping the economy on track for a moderate recovery from the deep slump it suffered earlier this year.
Saddled with the industrial world’s heaviest public debt at twice the size of its $5 trillion economy, Japan is struggling to proceed with fiscal reform.
The three extra stimulus budgets compiled this fiscal year will boost overall government spending to 176 trillion yen, or 1.7 times the initial budget. New borrowing will be pushed to a record 112 trillion yen.
Reflecting slumping corporate profits amid the virus crisis, next fiscal year’s tax revenue is estimated at around 57.5 trillion yen, versus 63.5 trillion yen initially expected this fiscal year.
To fill the budget gap, Japan is expected to issue around 43.6 trillion yen in new bonds, compared with 32.6 trillion yen initially planned for this fiscal year, the sources said.
The amount was a little shy of a record 44.3 trillion yen issued on an initial basis in fiscal 2010 amid the global financial crisis, but up from the previous year’s initial level for the first time in 11 years, they said.
Highlighting the mounting debt woes, debt-servicing costs would reach a record high of 23.8 trillion yen, they said.
($1 = 103.0700 yen)
(Reporting by Takaya Yamaguchi; Writing by Tetsushi Kajimoto; editing by Alison Williams, Larry King)
