The government’s budget for next fiscal year won’t set a spending cap on requests aimed at fighting the COVID-19 pandemic, Finance Minister Taro Aso said, suggesting the heavily indebted nation would ramp up efforts to revive the coronavirus-battered economy.
The government would ask ministries to keep requests for other spending in line with the current fiscal year’s initial budget totaling a record ¥102.7 trillion, Aso said at a Cabinet meeting.
It would then set aside an unspecified amount of budget requests to respond to “urgently needed expenses” to battle the fallout from the coronavirus.
“It’s extremely hard to predict how much we need for the next fiscal year’s budget to deal with the pandemic,” Aso said. “Through discussions with other ministries, we’ll compile a budget that will fit in the era of the new normal.”
The fiscal year begins in April.
The budget ceiling is usually set around mid-year by the Finance Ministry to keep a tab on spending requests from ministries for next year’s budget to be compiled in December.
“Response to the novel coronavirus remains an urgent task,” Aso was quoted as telling a Cabinet meeting. “On the other hand, there’s a limit to foresee how to respond with budget spending.”
The pandemic has taken a heavy toll on the world’s third-largest economy, which is in the grip of its worst postwar recession.
Prime Minister Shinzo Abe’s government has rolled out a combined stimulus spending worth ¥234 trillion, which has boosted the size of annual budget spending to ¥160 trillion with new debt issuance totaling ¥90 trillion.
The virus stimulus spending came on top of bulging welfare costs to support the nation’s aging population, which Aso said would be taken into consideration during budget compilation by the year-end.
The Finance Ministry will examine the requests and finalize the size of spending in December when it drafts next year’s budget. To lessen government officials’ workload amid a busy time during the pandemic, the deadline for the upcoming budgetary requests, which are to be submitted to the ministry for review, has been extended to Sept. 30 from the usual date at the end of August.
The ministry is trying to draft the fiscal 2021 budget more flexibly by simplifying its customary procedures to better cope with challenges that have arisen since the start of the COVID-19 crisis.
The special treatment of prospective virus-related spending could balloon the next fiscal year’s general budget account as well as the country’s huge outstanding debt load.
Japan’s fiscal health is the worst among the major economies, with public debt topping ¥1.1 quadrillion ($10.2 trillion).
This fiscal year’s budget was a record ¥102.66 trillion, and it is almost certain that general account budget requests for fiscal 2021 will total more than ¥100 trillion for the seventh consecutive year.
Concerns for the country’s further fiscal deterioration have been intensified by the pandemic. To cushion the economic fallout from the virus, stimulus packages included ¥100,000 each in handouts to 126 million residents in Japan.
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