The Cabinet approved Wednesday a draft second extra budget for fiscal 2016 to stimulate the flagging economy, bringing total public outlays for the year through March to over ¥100 trillion.
The extra budget reflects Prime Minister Shinzo Abe’s push to lift the world’s third-biggest economy out of chronic deflation. But it also underscores the government’s reliance on debt despite its pledge to rehabilitate the nation’s fiscal health, the worst among major developed countries.
This fiscal year’s initial and two supplementary budgets total ¥100.01 trillion, topping the ¥100 trillion mark for the first time in three years. The government has enacted a record ¥96.72 trillion initial budget for the fiscal year to cope with swelling social security costs amid a rapidly aging society.
Of ¥4.11 trillion in fresh expenditure on a general-account basis, ¥3.99 trillion will fund part of an around ¥28 trillion economic stimulus package approved earlier this month by the Cabinet, including investment in infrastructure and welfare.
The government will issue ¥2.75 trillion worth of construction bonds amid a revenue shortfall, with total bond issuance increasing from the previous fiscal year for the first time in four years.
“We have not changed the direction” of achieving a primary balance surplus in fiscal 2020, Finance Minister Taro Aso told reporters after the Cabinet approved the extra budget, pledging to maintain Japan’s fiscal reform goal.
Aso also said he hopes the stimulus measures will help improve consumer and corporate sentiment, as the government will promote large-scale investments such as infrastructure building by utilizing low interest rates.
The second extra budget will be submitted to an extraordinary Diet session as early as next month.
The actual size of the general-account budget will be limited to ¥3.29 trillion, due to reduced interest payments for government debt amid lower interest rates and a cutback in a reserve fund used to rebuild parts of Kyushu following earthquakes in April.
Including special accounts such as one for reconstructing the Tohoku region, which was devastated by massive quakes and tsunami in 2011, additional expenditure will total ¥4.52 trillion.