The Japanese government is planning nearly £537bn of record spending in the next fiscal year to shore up a fragile economy, with Tokyo also promising to rein in a bulging debt burden in an expansionary budget set to be unveiled this week.
Finance minister Taro Aso on Tuesday vowed to boost growth and achieve fiscal reform with government budget spending worth 96.7tn yen (£535bn) for the next fiscal year that starts in April.
Confirming figures reported by Reuters last week, Aso said tax revenue is estimated at a 25-year high of 57.6tn yen in fiscal 2016.
That revenue assumption, based on an expected economic growth of a nominal 3.1% and real 1.7%, will allow the government to slash new bond issuance by 2.4tn yen from this year to 34.4tn yen, he said.
The budget plans signal a growing commitment by prime minister Shinzo Abe to rein in the industrial world’s heaviest debt burden even as he continues to pump-prime the economy via a cocktail of expansionary policies.
“This budget is appropriate for marking the first step towards our new fiscal plan while we aim for economic revival and fiscal consolidation at the same time,” Aso said.
He said the government was making progress towards achieving a primary budget surplus – excluding new bond sales and debt servicing – by the fiscal year ending March 2021.
The decreasing level of new borrowing and rising tax income on the back of corporate profits will bring Japan’s fiscal dependence on bond financing to 35.6% in 2016 – the lowest since 2008, just before the global financial crisis dealt a blow to the world’s third largest economy.