Budget requests by Japan’s central government offices for a new fiscal year from next April are expected to exceed ¥101 trillion ($1 trillion), government sources said Thursday.
The requests for the general-account budget for fiscal 2017 will top ¥100 trillion for the third straight year, reflecting increasing social security costs amid a rapidly aging society and expenses to fund key policies of Prime Minister Shinzo Abe.
The requests are likely to be some ¥5 trillion higher than the fiscal 2016 initial budget but fall around ¥1 trillion short of the record ¥102.4 trillion requested for the fiscal 2016 budget, as low interest rates will reduce debt servicing costs.
The Finance Ministry will accept budget requests from other government agencies until next Wednesday, with an eye to slashing several trillion yen in a run-up to drafting a fiscal 2017 budget later this year as an economic slowdown may hurt tax revenues.
Requests for social security costs such as pension and medical expenses are likely to exceed ¥31 trillion, up around ¥640 billion from the fiscal 2016 initial budget, while those for grants to local governments are expected to grow 4.8 percent to ¥16.01 trillion in general-account outlays.
Requests for policy spending, which also include public works and educational expenditures and personnel costs for ministries, are expected to total around ¥77 trillion, the sources said.
The government expects debt servicing costs will amount to ¥24.62 trillion, down some ¥1.4 trillion from the previous year’s requests, as it will assume a record low interest rate of 1.6 percent on government bonds.
The move reflects declining bond yields, which for many outstanding issues have entered negative territory on the back of the Bank of Japan’s negative interest rate policy adopted last January.
But the expense is around ¥1 trillion higher than that in the initial fiscal 2016 budget, due to an increase in outstanding government bonds. Of the amount, ¥14.43 trillion will go to government bond redemption and ¥10.15 trillion to interest payments.
The major ministries and agencies will increase their budgetary requests by fully utilizing a special spending framework to fund projects related to the government’s growth strategy and policies to enhance social security services.
The Ministry of Agriculture, Forestry and Fisheries is expected to seek ¥2.64 trillion, up 14.1 percent from the fiscal 2016 initial budget, to place emphasis on measures to boost competitive edge in the agricultural sector, such as expanding farmland.
The Ministry of Land, Infrastructure, Transport and Tourism is likely to ask for ¥6.67 trillion\, up 15 percent.
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