The nation’s initial budget for fiscal 2021 is on track to set a record for the ninth straight year as the government increases reserve funds to deal with the coronavirus pandemic and due to rising outlays for defense and social security, government sources said Wednesday.
The sources said the total may even surpass ¥105 trillion — compared with the current fiscal year’s ¥102.66 trillion — including ¥5 trillion set aside for reserve funds, which the government can spend without parliamentary discussion.
Additional debt issuance to finance the upcoming budget will further deteriorate Japan’s fiscal health, which is the worst among major developed countries. Public debt exceeded ¥1.100 quadrillion as of the end of fiscal 2019, more than double its gross domestic product.
Prime Minister Yoshihide Suga’s Cabinet is expected to approve the draft general-account budget late this month. It will be submitted to the ordinary Diet session to be convened in mid-January.
Amid the economic fallout from the pandemic, the government is expected to issue more new debt for the next fiscal year.
In fiscal 2020, tax revenue is expected to total about ¥55 trillion, the sources said, far short of the government’s initial projection of ¥63.51 trillion due to poor corporate earnings.
For the first time, new government bond issuance is on track to top ¥100 trillion in the current fiscal year.
The government has already decided to issue new debt worth about ¥90.2 trillion for the year, as its total annual spending, also including the first and second supplementary budgets, has swelled to over ¥160 trillion.
Apart from pandemic-related factors, spending on social security in the coming fiscal year will increase by a few hundred billion yen from the current year as the population rapidly grays, according to the sources.
In recent years, the costs for pensions and other social welfare services have accounted for about a third of Japan’s initial budget.
The country’s defense expenditure in fiscal 2021, meanwhile, is expected to top ¥5 trillion for the sixth consecutive year and may surpass the record ¥5.31 trillion in fiscal 2020, according to the sources.
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