• Kyodo


The Cabinet of Prime Minister Shinzo Abe on Friday approved a record-high ¥101.46 trillion draft budget for fiscal 2019, topping ¥100 trillion for the first time amid swelling social security and defense expenses, meaning Japan remains far from consolidating its battered fiscal health despite increasing tax revenue.

The spending plan also includes funding for measures to bolster the economy against an upcoming consumption tax hike.

The draft of the initial budget for the general account, which will be submitted to the Diet in January, consists of a record-high ¥77.95 trillion for policy spending and ¥23.51 trillion in debt-servicing costs.

Among the policy spending, ¥2.03 trillion will go toward the “extraordinary measures” Abe had promised to underpin domestic demand after the consumption tax is raised from the current 8 percent to 10 percent next Oct. 1.

More than half of that amount will be used to make infrastructure such as roads and river embankments more resilient and procure equipment for emergency services after the country was hit by a series of natural disasters this summer including a typhoon that flooded Osaka’s main airport and an earthquake that caused a massive power outage in Hokkaido.

The measures also include a rebate program that aims to encourage consumers to shop at smaller businesses using credit cards and other cashless payment methods, as well as providing shopping vouchers for households with low incomes or small children and incentives to make home purchases.

“I’m confident that these steps are sufficient to overcome the economic impact of the consumption tax increase,” Finance Minister Taro Aso told a news conference the same day.

Social security costs took up more than a third of the total budget, a record-high ¥34.06 trillion, as a rapidly aging population pushed up spending on health care and pensions. The scheduled launch in October of free pre-elementary education also contributed.

Defense spending will also hit a record high of ¥5.26 trillion, with significant outlays coming through preparations to introduce the land-based Aegis Ashore missile defense system and half a dozen F-35A stealth fighters.

Based on the assumption that Japan’s economy will grow an inflation-adjusted 1.3 percent in the year ending in March 2020, tax revenue is expected to increase 5.8 percent from the previous year to ¥62.50 trillion, another record high.

A steady rise in tax revenue has reduced the government’s dependence on public debt in recent years, with 32.2 percent of the budget to be funded by debt compared with 43.0 percent five years earlier. New bond issuances will decrease for the ninth straight year to ¥32.66 trillion.

“With this budget, we’ve been able to balance supporting the economic recovery with fiscal consolidation,” Aso said.

Still, Japan continues to have the poorest fiscal health among major industrialized economies, with public debt more than twice the size of gross domestic product.

Among the outlays, spending on public works projects including the disaster-proofing of infrastructure will come to ¥6.91 trillion, a 15.6 percent jump from the previous year. An additional ¥556.6 billion will be used for official development assistance in foreign countries.

The budget also sets aside ¥14.4 billion for activities related to the abdication of Emperor Akihito and the ascension of Crown Prince Naruhito to the throne in the spring. The ascension is to be commemorated with a series of ceremonies that will see dignitaries from around the world in attendance.

Along with the fiscal 2019 initial budget, the Abe administration plans to seek approval by the Diet for a second supplementary budget for fiscal 2018 worth ¥3.04 trillion. More than a third of the extra budget will also go toward disaster-proofing measures.

The rest will be used for other miscellaneous purposes such as shoring up Japan’s agricultural sector in view of the entries into force of the 11-member Japan-led Comprehensive and Progressive Agreement for Trans-Pacific Partnership free trade agreement on Dec. 30 and an FTA with the European Union in February.

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