Japan Approves Record Budget Amid Rising Social Security Costs
(Bloomberg) — Japan’s cabinet approved a record budget for next fiscal year, with social security costs pushing up the bill for a government already struggling with the developed world’s biggest public debt.
Spending by the Japanese government will increase by about 1.2% to 102.7 trillion yen ($939 billion) in the year starting April, the Finance Ministry confirmed Friday. Outlays on social security will account for around a third of spending.
Prime Minister Shinzo Abe is trying to narrow the deficit and rein in debt that exceeds 200% of gross domestic product, but rising costs for health care and pensions in this rapidly aging society make that hard. In the short-term, a stimulus package unveiled this month to boost flagging growth also complicates the effort. Longer-term, a hike to the sales tax in October will bring in more money.
“There hasn’t been a lot of change to overall spending, but the stimulus package adds to the bloat,” said Harumi Taguchi, Tokyo-based principal economist at IHS Markit.
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Here’s the breakdown of expenditures:
- 61.7 trillion yen in general spending, including around 36 trillion yen for social security
- Debt servicing of 23.4 trillion yen
- 15.8 trillion yen in transfers to regional and local governments.
On the income side, bond issuance is planned to drop for a seventh straight year. Income derived from debt will drop to 31.7% of total revenue, compared with 32.2% in 2019. Even so, the government doesn’t project a balanced budget until fiscal 2027. The Finance Ministry plans to offer 128.8 trillion yen worth of government bonds next fiscal year.
This is the breakdown of fiscal 2020’s projected income:
- 63.5 trillion yen in tax revenue.
- 32.6 trillion yen in revenue from bond issuance
- 6.6 trillion yen from other sources.
The initial budget may not give a full picture of Japan’s spending for next year because the government regularly drafts extra budgets that push up the numbers.
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Source : Bloomberg Link