The Abe administration is considering curbing the new issuance of government bonds to around ¥42 trillion in fiscal 2014, down about ¥1 trillion from the initial state budget for the current fiscal year, due to a projected increase in tax revenues, sources said Saturday.
Tax revenues in the general account are forecast to increase by more than ¥7 trillion in fiscal 2014 on the back of next April’s sales tax hike to 8 percent from the current 5 percent, as well as expected growth in corporate tax revenues, the sources said.
Prime Minister Shinzo Abe’s government expects tax revenues to top ¥50 trillion in fiscal 2014 for the first time in seven years, a sizeable jump from around ¥43.1 trillion in the initial budget for fiscal 2013.
But most of the increase in tax revenues will likely be allocated to cover soaring social security costs, the sources added.
As the Liberal Democratic Party-New Komeito ruling bloc is pushing for expenditures to be used to ensure economic growth, budgetary requests from ministries and government agencies for policy-related spending for the next fiscal year amounted to ¥75 trillion, up over ¥4 trillion from fiscal 2013.
The Finance Ministry, meanwhile, wants to use the anticipated increase in tax revenues to reduce the new issuance of government bonds, as Japan’s fiscal condition is the worst among developed countries, with outstanding debt of over ¥100 trillion.
The ruling parties are therefore expected to face a fierce battle over how to allocate the expected increase in tax revenues.