The government has decided to earmark a record ¥102.66 trillion ($938 billion) in the initial draft budget for fiscal 2020, to fund swelling social security and defense outlays, government sources said Wednesday.
The spending plan, which Prime Minister Shinzo Abe’s Cabinet will approve Friday, will top ¥100 trillion for the second consecutive year. The draft budget includes funds for free preschool education as well as record defense spending, partly due to the North Korean nuclear and missile threat.
The government will also allocate around ¥1.8 trillion for steps aimed at shoring up the world’s third-largest economy, including a shopping reward point program for purchases made by holders of My Number national identification cards.
The initial general account budget for the current fiscal year ending in March stood at ¥101.46 trillion.
Tax revenue is estimated to stand at a record ¥63.51 trillion in fiscal 2020, up roughly ¥1 trillion from the initial budget for the current fiscal year, supported by the Oct. 1 consumption tax increase from 8 percent to 10 percent.
As part of efforts to improve its battered fiscal health, the government plans to cut new bond issuance by about ¥100 billion to ¥32.56 trillion, down for the 10th consecutive year.
The total amount of the draft budget was decided after a meeting between Finance Minister Taro Aso and internal affairs minister Sanae Takaichi over the allocation of national tax revenues to local governments.
The central government will distribute ¥16.6 trillion to local governments, up ¥400 billion from the previous year.
The planned provision will bring the total general account budget of local governments to a record ¥63.4 trillion, up ¥700 billion from a year earlier.
Municipalities can spend the funds at their own discretion for such purposes as repairing aging infrastructure.
In an effort to reduce ballooning social security costs due to the graying population, the government plans to limit the increase in social security costs next fiscal year to around ¥410 billion, down from the ¥530 billion forecast previously.
The limit was agreed to after related government ministries reached a compromise. The health ministry had sought a rise in medical service fees as big as the one in fiscal 2018, while the Finance Ministry pursued cuts in medical expenditures.