Japan’s record $ 940 billion budget could help COVID-hit economy, fiscal discipline in doubt


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A view of the skyline and buildings of the Shinjuku district at sunset in Tokyo, Japan on June 20, 2021. REUTERS / Pawel Kopczynski

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TOKYO, Dec.24 (Reuters) – Japanese Prime Minister Fumio Kishida’s office on Friday approved a record $ 940 billion budget for the next fiscal year, with responses to COVID-19 adding to the costs of supporting an aging population and increased military spending to deal with China.

The 107.6 trillion yen ($ 941.55 billion) budget for fiscal year 2022/23, which begins in April, is Japan’s largest initial spending plan, underscoring its priority to revive the affected economy. pandemic rather than restoring long-term fiscal health.

The first annual budget under Kishida comes after parliament approved 36 trillion yen in additional stimulus spending for this fiscal year to help the recovery from COVID-19.

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But there is still little room for spending in growth areas like green and digital transformation.

The budget includes 5,000 billion yen set aside to cover the emergency costs of COVID-19, a record defense expenditure of 5.37 trillion yen, the highest social cost on record of 36.3 trillion yen and 24.3 trillion yen for debt service. Japan’s public debt is twice the size of its $ 5,000 billion economy, the heaviest of the industrialized countries.

Kishida is committed to improving Japan’s public finances in the long term, and the budget forecasts new borrowing for next year of 36.9 trillion yen, less than the 43.6 trillion yen originally forecast for this year.

The drop in borrowing will be replaced by higher tax revenues, which are expected to rise for the first time in two years to a record 65.2 trillion yen as COVID-19 restrictions on economic activity are relaxed.

The government estimates real economic growth of 3.2% for the 2022/23 fiscal year, compared to an earlier estimate of 2.2% which forms the basis of the budget plan.

But with debt still accounting for 34.3% of the budget, it will remain difficult to achieve a primary budget surplus by FY 2025/26 as the government aims to do.

The primary budget deficit – excluding new bond sales and debt service – is estimated at 13 trillion yen in fiscal year 2022/23, an improvement from the 20 trillion yen observed this year but again. far from the government’s goal.

($ 1 = 114.2800 yen)

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Reporting by Tetsushi Kajimoto; Editing by Catherine Evans

Our Standards: Thomson Reuters Trust Principles.

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