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Japan FY 2018 draft budget to be record high for 6th straight year

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The central government's draft budget for the next fiscal year from April will likely be record high for the sixth straight year, due to expanded spending on social security programs and defense, government sources said Wednesday.

It will exceed the 97.45 trillion yen in the initial budget for this fiscal year through March, but not reach 98 trillion yen, they said.

Japanese government bond issuance is expected to decline from fiscal 2017 to around 34 trillion yen, reflecting increased tax revenue during fiscal 2018.

Swelling social security spending will likely reach around 33 trillion yen while around 5.2 trillion yen will be budgeted for defense, the most ever, to cope with the missile threat from North Korea, according to the sources.

Japan has been trying to rein in ballooning social security expenditures that include pensions and medical expenses amid the rapid aging of its population.

For the fiscal 2018 general-account budget, social security spending is estimated to increase by 500 billion yen from the current business year.

Debt-servicing costs will likely stay at around this year's

23.53 trillion yen, the sources said, as the government will assume an interest rate of 1.1 percent, given Bank of Japan policy to keep interest rates very low.

Government bond issuance is expected to decline from fiscal 2017 to around 34 trillion yen, reflecting increased tax revenue during fiscal 2018.

Japan's economy has been on a moderate recovery trend, boding well for tax revenue in fiscal 2018. Tax revenue is expected to surpass the 57.71 trillion yen estimated for this year, hitting its highest level since fiscal 1991 when tax revenue totaled 59.82 trillion yen.

© KYODO

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