Japan’s Kishida advances $ 940 billion budget to boost pandemic | Business and Economic News

The record spending is $ 5 trillion in the country despite the public debt being twice the size of the economy.

Japanese Prime Minister Fumio Kishida’s cabinet approved a record $ 940 billion budget for the next fiscal year on Friday, in addition to COVID-19’s response to the prime minister’s goal of growth and wealth under his new capitalism agenda.

The $ 107.6 trillion ($ 941.55 billion) budget for April 2022-2023 is Japan’s largest-ever spending plan, emphasizing its priority for reviving the pandemic-driven economy rather than restoring long-term fiscal health.

This is the tenth year in a row that Japan’s annual budget has reached a record high. The budget is due to be approved by parliament by the end of the current March term.

Kishida’s first annual budget comes a few days after parliament approved $ 36 trillion ($ 315 billion) in record-breaking spending. Recovery from COVID-19.

Higher spending means that fiscal discipline is being freed up with the Bank of Japan’s (BOJ) ultra-loose monetary policy to keep borrowing costs low.

“Politicians are showing no signs of trying to pay off government debt,” said Yasunari Ueno, head of market economics at Mizuho Securities. “Lack of fiscal discipline is the biggest side effect of the BOJ’s massive money laundering.”

The budget includes 5 trillion yen ($ 43.7 million) to cover COVID-19’s emergency costs, a record $ 5.37 trillion ($ 47 trillion) in defense spending, the highest welfare cost ever, and 36.3 trillion yen ($ 317 million). and 24.3. trillion yen ($ 212.7 million) for debt service.

Japan’s public debt, the world’s third-largest economy, is more than double its $ 5 trillion ($ 43.7 million) economy, the largest of the industrialized countries.

Higher tax revenues

Kishida is committed to improving Japan’s public finances in the long run, and the budget envisages 36.9 trillion yen ($ 323 million) in new loans next year, less than the 43.6 trillion yen ($ 381.6 million) initially planned.

Lower debt will be replaced by higher tax revenue, rising to a record 65.2 trillion yen ($ 570.6 million) for the first time in two years as COVID-19 slows economic activity.

The government estimates real economic growth at 3.2 per cent in 2022-2023, up from 2.2 per cent in the previous budget plan.

But with debt still at 34.3 percent of the budget, it will be difficult to get a surplus from the first budget for the 2025-2026 fiscal year, as the government wants.

A budget deficit – excluding new bond sales and debt service – has seen 13 trillion yen ($ 113.8 million) in fiscal year 2022-2023, far from the 20 trillion yen ($ 175 million) seen this year, but still far from government far away. purpose.