Prime Minister Shinzo Abe's Cabinet on Tuesday approved its budget compilation guidelines for fiscal 2019, allowing for additional spending on social security and economic growth to set the stage for a record-high initial budget.
General account budget requests from ministries and agencies, which are to be submitted to the Finance Ministry for review by the end of August, are expected to top ¥100 trillion for the fifth consecutive year.
The guidelines do not set a ceiling for overall expenditures in the year through March 2020, making room for a ¥600 billion increase in requests for spending on social security such as pensions, health care coverage and welfare.
While such spending is seen as necessary for Japan's fast-graying population, it also raises concerns that the country will fall behind in improving its poor fiscal health.
The largest initial budget ever — for fiscal 2018 — was ¥97.71 trillion.
The guidelines allot more than ¥4 trillion to programs aimed at fostering economic growth, such as those that may help increase productivity and human resource development, one of Abe's centerpiece policies.
Abe is also looking to implement "extraordinary" fiscal measures to counteract the negative effects on domestic demand of an increase in the consumption tax next year.
Following a Cabinet meeting Tuesday morning, Finance Minister Taro Aso said his ministry will compile a budget that serves to "level out" the surge in demand ahead of the tax hike and the subsequent drop-off.
The guidelines call for discretionary spending to be reduced by 10 percent from the fiscal 2018 budget, while also seeking to cut down on mandatory spending such as personnel costs.