Prime Minister Shinzo Abe's "Abenomics" economic policies retain fiscal expansion as a key pillar of the draft budget for the next fiscal year, fanning concern that Japan's swelling debt could hamper the broader economy in the longer term.
An insufficient commitment to putting the country's fiscal house in order could drive investors away from Japanese government bonds and push up long-term interest rates, which in turn may discourage the private sector from boosting investment and hinder growth in domestic demand, analysts said.
Abe's Cabinet, formed on Dec. 26, approved a record-high ¥92.61 trillion initial general-account budget for fiscal 2013 on Tuesday, aiming to bolster the economy, beset by deflation, through large-scale public works projects.