• Kyodo

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Budget requests by ministries and agencies for fiscal 2022 are expected to total over ¥110 trillion ($1 trillion) for the first time, due to swelling debt-servicing costs amid the COVID-19 pandemic, government sources said Thursday.

The requests for the year starting next April, to be filed by next Tuesday, are set to hit a record high for the fourth straight year.

After assessing the requests, the Finance Ministry will draft the initial state budget in December before Diet deliberations. The draft could also eclipse the initial fiscal 2021 budget of ¥106.61 trillion, which included ¥5 trillion in funds reserved for responding to the pandemic.

Interest payments and other debt-servicing costs will surge 27.3% to a record ¥30.24 trillion under the new budget, the sources said, citing the ministry’s estimate.

The government has issued a large amount of government bonds to secure funds for coronavirus countermeasures and to make up for chronic tax revenue shortfalls.

The country’s fiscal health, already the worst among major economies, has been deteriorating further with over ¥1,200 trillion worth of public debt, or well over 200% of gross domestic product, as of March.

Amid a rapidly graying population, health care and pension costs will likely continue to balloon — expected to grow by ¥660 billion from fiscal 2021 when they rose to a record ¥35.84 trillion, according to the sources.

Social security spending has accounted for about a third of an initial budget in recent years.

The Defense Ministry will ask for ¥5.48 trillion, larger than the record ¥5.34 trillion for fiscal 2021, Defense Minister Nobuo Kishi said during a meeting of the ruling Liberal Democratic Party on national security.

With a larger defense budget, Japan will aim to strengthen its capabilities around remote southwestern islands to counter China’s growing maritime assertiveness, the sources said. The budget would also cover developing advanced technologies, including unmanned aircraft that use artificial intelligence.

To subsidize local governments grappling with the pandemic, the Ministry of Internal Affairs and Communications will seek ¥15.86 trillion, according to the sources.

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