The government will compile a draft budget for fiscal 2022 worth about ¥107.6 trillion ($950 billion), a record high for the 10th straight year, government sources said Wednesday.
The government plans to add ¥5 trillion to reserve funds for future responses to the coronavirus pandemic and prepare general account expenditures for the fiscal year starting April topping the ¥100 trillion threshold for the fourth straight year.
The budget will expand due to swelling social security costs and defense expenditures, according to the sources.
The estimated sum will exceed the initial budget of ¥106.61 trillion for fiscal 2021 that included ¥5 trillion of virus reserve funds.
New government bond issuance to finance the budget will likely total ¥36.9 trillion, down from ¥43.6 trillion for the current year's initial budget, the sources said.
The budget has been drafted on the assumption that the government will see record tax revenue of ¥65.2 trillion, up from ¥63.9 trillion estimated for the current year, according to the sources.
The government had originally projected tax revenue for fiscal 2021 of ¥57.4 trillion when compiling the year's initial budget, but it was revised upward by ¥6.4 trillion when drawing up a supplementary budget earlier this month to finance the government's latest economic stimulus package.
Social security costs, accounting for about a third of Japan's initial budgets in recent years, will increase by several hundred billion yen from fiscal 2021 on the back of the nation's aging population, according to the sources.
Defense spending may reach a record ¥5.4 trillion, reflecting Prime Minister Fumio Kishida's pledge to strengthen national security in response to China's increasing military clout and the North Korean nuclear and missile threat, the sources said.
Kishida's Cabinet is expected to approve the draft budget on Friday.