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Japan’s FY2021 budget to hit record high of over ¥102.66 tril

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japantoday– Japan’s initial budget for fiscal 2021 will total more than 102.66 trillion yen ($986 billion), a record high for the ninth straight year, mainly due to an increase in the amount of reserve funds to fight the coronavirus pandemic, government sources said Wednesday.

In addition to setting aside 5 trillion yen for the funds, which the government can spend without parliamentary discussion, the budget for the year starting in April has been enlarged to deal with rising social security and defense outlays.

The sources said the total, compared with the current fiscal year’s 102.66 trillion yen, may even surpass 105 trillion yen.

Additional debt issuance to finance the upcoming budget will further deteriorate Japan’s fiscal health, the worst among major developed countries. Public debt exceeded 1,100 trillion yen as of the end of fiscal 2019, more than double the gross domestic product.

Prime Minister Yoshihide Suga’s cabinet is expected to approve the draft general-account budget late this month. It will be submitted to an ordinary parliamentary session to be convened in mid-January.

Amid the economic fallout from the pandemic, the government is expected to issue more new debt for the next fiscal year.

In fiscal 2020, tax revenue is expected to total about 55 trillion yen, the sources said, far short of the government’s initial projection of 63.51 trillion yen due to poor corporate earnings.

New government bond issuance is on track to top 100 trillion yen for the first time in the current fiscal year.

The government has already decided to issue new debt worth about 90.2 trillion yen for the year, as its total annual spending, also including the first and second supplementary budgets, has swelled to over 160 trillion yen.

Apart from the pandemic-related factors, spending on social security in the coming fiscal year will increase by a few hundred billion yen from the current year as the population rapidly ages, according to the sources.

In recent years, the costs for pensions and other social welfare services have accounted for about a third of Japan’s initial budget.

The country’s defense expenditure in fiscal 2021, meanwhile, is expected to top 5 trillion yen for the sixth consecutive year to possibly surpass the record 5.31 trillion yen in fiscal 2020, according to the sources.