Budget requests from government ministries and agencies for fiscal 2019 reached a record-high ¥102.5 trillion ($923 billion) amid snowballing social security costs and increasing defense spending, officials said Friday.
The figure suggests that the initial general account budget for the year beginning next April could top ¥100 trillion for the first time, making it all the more difficult for the government to achieve fiscal consolidation.
Prime Minister Shinzo Abe’s administration is also preparing an additional fiscal stimulus package aimed at underpinning domestic demand after a planned consumption tax hike in October 2019.
Officials at the Finance Ministry will evaluate each request, trimming expenditures they deem unnecessary to draw up a draft budget for Cabinet approval by the end of the year. The draft will then be submitted to the Diet and enacted in March.
The initial state budget for the current fiscal year came to a record ¥97.71 trillion after the ministry reviewed requests totaling ¥100.96 trillion.
For Japan, restoring its fiscal health — the worst among advanced economies — is a paradoxical issue as it faces swelling social security costs to care for the country’s aging population.
In June, the Abe administration effectively removed a cap on increases in such spending, which includes pensions and medical coverage and accounts for a third of government outlays.
Political factors are also expected to come into play, with Abe’s Liberal Democratic Party likely to shun unpopular austerity measures ahead of House of Councillors election next summer.
The Ministry of Health, Labor and Welfare asked for a record ¥31.90 trillion, up 2.5 percent from the fiscal 2018 initial budget. Social security spending, including that by other parts of the government, is set to grow by around ¥600 billion to more than ¥32 trillion.
The Defense Ministry sought ¥5.30 trillion, up 2.1 percent and also a record high, including ¥235.2 billion to purchase the land-based Aegis Ashore missile defense system from the United States, a measure aimed at countering the missile threat from North Korea.
The Justice Ministry proposed a budget of ¥801.9 trillion, an increase of 2.0 percent, partly to fund the creation of a new immigration agency as the country prepares to open its doors to more foreign workers.
The Ministry of Land, Infrastructure, Transport and Tourism requested ¥6.91 trillion, up 19 percent. Public works projects accounted for ¥6.17 trillion of the total, with a particular focus on preventing floods and landslides after torrential rains in western Japan claimed more than 220 lives in July.
The Foreign Ministry asked for ¥810.1 billion, up 16 percent, to cover the cost of hosting the Group of 20 summit and ministerial meetings in the country and receiving foreign dignitaries for a ceremony marking Crown Prince Naruhito’s accession to emperor following the abdication of Emperor Akihiro.
The Finance Ministry estimates that ¥24.59 trillion will be needed for debt-servicing costs, up 5.5 percent amid a recent rise in long-term yields.
Aside from the general account budget, the government also requested ¥1.54 trillion in a special account budget for ongoing recovery efforts from the 2011 earthquake and tsunami, down 5.7 percent.