Business / Economy

Japan's Diet passes record ¥101 trillion budget with spending hikes for defense and social security

Kyodo

The Diet on Wednesday enacted a record ¥101.46 trillion ($920 billion) budget for fiscal 2019 that will boost spending on social security and defense and include stimulus measures to buoy the economy after a planned consumption tax hike.

The budget cleared the chamber in the afternoon following approval by the Upper House, which is controlled by the ruling coalition of the Liberal Democratic Party and Komeito.

While the government routinely draws up supplementary budgets later in the fiscal year to cover any additional spending, this is the first time the general account budget has topped ¥100 trillion from the start.

Key to the budget for the year starting April 1 is a ¥2.03 trillion stimulus package that Prime Minister Shinzo Abe hopes will underpin domestic demand after the consumption tax is increased to 10 percent from the current 8 percent in October.

The package includes a rebate program for purchases made by credit cards and other cashless means, shopping vouchers for households with low incomes or small children, and public works spending to shore up infrastructure against natural disasters.

As in past years, the largest chunk of the budget, a record ¥34.06 trillion, has been set aside for social security outlays including on health care and pensions, with such costs swelling amid a rapidly aging population.

Defense spending accounted for a record ¥5.26 trillion, due in part to purchases of the Aegis Ashore missile defense system and six F-35A stealth fighters.

The budget, the enactment of which had already been guaranteed after clearing the more powerful Lower House on March 1, has been the subject of some drama.

After Abe’s Cabinet signed off on a draft of the budget late last year, it came to light that government officials had been publishing faulty jobs data for nearly 15 years.

This led to the underpayment of work-related benefits to more than 20 million people, necessitating the addition of ¥650 million to the budget to cover payouts.

A steady rise in government spending — the initial budget has marked record highs for the past seven years — means Japan, despite higher tax revenue, remains far from consolidating its battered fiscal health.

The country’s fiscal health is the worst among major industrialized economies, with public debt more than twice the size of gross domestic product.

The government expects a record ¥62.50 trillion in tax revenue during fiscal 2019, with issuance of new government bonds falling slightly to ¥32.66 trillion.