Business / Economy

Japan's initial fiscal 2020 budget to top ¥100 trillion again, hitting new record

Kyodo

Japan’s initial budget for fiscal 2020 will hit a record high and top ¥100 trillion ($920 billion) for the second straight year due to swelling social security and defense costs, government sources said Monday.

The initial general account budget for the current fiscal year ending March stood at ¥101.46 trillion.

Prime Minister Shinzo Abe’s Cabinet plans to approve a draft of next fiscal year’s budget on Dec. 20 and submit it to a regular Diet session to be convened in January.

The total amount is expected to increase as the government aims to earmark funds for free preschool education to be extended by six months as well as a rebate program for purchases made via cashless methods — including credit cards — aimed at bolstering consumer spending following the October consumption tax hike.

Meanwhile, the government may increase the amount of deficit-covering bonds as tax revenue is unlikely to rise as expected, according to the sources.

The Finance Ministry is seeking to curb the expected rise in spending in the face of growing criticism from opposition parties.

The government will need around ¥800 billion for the extended free preschool education program, compared with ¥388.2 billion allocated for half a year in fiscal 2019 for that purpose.

On the back of Japan’s rapidly graying population, social security expenditures are likely to increase by roughly ¥400 billion from the current fiscal year.

Defense outlays will likely total about ¥5.3 trillion, up from ¥5.26 trillion in the current year and marking an eighth straight year of increase, partly due to the North Korean nuclear and missile threat.

In addition to about ¥250 billion allocated for the existing rebate program, scheduled to run through June, the government plans to allocate an additional ¥250 billion for another shopping reward point program for purchases made by My Number ID cardholders from September.

The government hopes the unpopular identification system will spread through the reward points.

Although the consumption tax rate was raised by 2 percentage points to 10 percent, the country’s tax revenue for fiscal 2020 is expected to fall short of the ¥62.50 trillion initially estimated for the current fiscal year, the sources said.

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