TOKYO: Japan plans a ￥96.7 trillion (US$797 billion) budget for the fiscal year starting in April to support the nation’s economy as rising tax revenue reduces the need to issue new bonds.
The Japanese government and the ruling coalition parties approved the budget proposal, Japanese Minister of Finance Taro Aso told reporters in Tokyo yesterday.
Tax revenue is projected to rise to ￥57.6 trillion, the most since fiscal 1998, while new bond issuance is forecast to fall to ￥34.4 trillion, the lowest since fiscal 2009.
The bond issuance is to cover 35.6 percent of the proposed budget, which is the lowest since fiscal 2008.
The budget plan shows that Japanese Prime Minister Shinzo Abe’s strategy has been somewhat successful in reining in the world’s biggest debt burden with economic revitalization. An increase in the sales tax last year boosted revenue, and Abe plans to raise it again in April 2017 while reducing taxes for companies in a bid to aid their competitiveness.
“Fiscal rehabilitation is making steady progress,” Dai-ichi Life Research Institute lead economist Hideo Kumano said. “A higher sales tax does hurt the economy, but the budget numbers today [yesterday] tell us that it doesn’t break the economy. A sales tax bump is a wild card to rebuild finances.”
The government on Friday last week announced a ￥3.5 trillion supplementary budget for the current fiscal year ending in March, with about a third set aside for initiatives including demographics issues, providing money for low-income pensioners and regional revitalization. The extra budget is to be funded by increased tax revenue and surplus funds from the previous fiscal year.
Japan’s annualized GDP expanded 1 percent in the quarter ended Sept. 30 from the previous period, according to revised figures, avoiding a recession as previously thought.
The Bank of Japan on Friday kept its main monetary stimulus target unchanged, while outlining operational changes for its purchase of government bonds, exchange-traded funds and real-estate investment trusts.
