Japanese Prime Minister Fumio Kishida's Cabinet approved on Friday (Dec 24) a record US$940 billion budget for the next fiscal year as COVID-19 responses added to the costs of supporting an ageing population and rising military outlays to cope with China.
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The ¥107.6 trillion (US$941.55 billion) budget for the fiscal year 2022-2023, which starts in April, is Japan's biggest-ever initial spending plan, underlining its priority on reviving the pandemic-hit economy over restoring long-term fiscal health.
The first annual budget under Kishida comes after parliament approved ¥36 trillion of extra stimulus spending for this fiscal year to aid the recovery from COVID-19.
But there is still limited room for spending in growth areas like green and digital transformation.
The budget includes ¥5 trillion set aside to cover emergency costs of COVID-19, a record defence outlay of ¥5.37 trillion, the largest-ever welfare cost of ¥36.3 trillion, and ¥24.3 trillion for debt servicing. Japan's public debt is twice the size of its US$5 trillion economy, the heaviest among industrialised countries.
Kishida has pledged to improve Japan's public finances in the long run and the budget foresees new borrowing next fiscal year of ¥36.9 trillion, less than the ¥43.6 trillion initially planned for this year.
Lower borrowing will be replaced with higher tax revenues, seen rising for the first time in two years to a record 65.2 trillion yen as COVID-19 curbs on economic activity are eased.