Photographer: Tomohiro Ohsumi / Bloomberg
Photographer: Tomohiro Ohsumi / Bloomberg
The Japanese cabinet approved a record budget next year, which exceeds $ 1 trillion and adds to the heaviest debt burden in the world, as Prime Minister Yoshihide Suga struggles to fight the coronavirus and sustain an economic recovery.
Japan’s budget for 2021 provides for a total expenditure of 106.6 trillion yen in the 12 months starting in April, an increase of 3.8% from last year’s initial budget, the finance ministry confirmed on Monday. Actual spending could increase much more, given the likelihood of additional budgets, three of which were drafted this year amid the pandemic, adding 73 trillion yen to total spending.
The gap widens
Japan’s spending is rising as the coronavirus devastates the economy
Source: Ministry of Finance
“We had to balance ourselves by preventing other infections, economic recovery and fiscal consolidation,” said Finance Minister Taro Aso. “Balancing action was the most difficult part of compiling the budget.”
The pandemic has forced Japan to add to its mountain of public debt, with new debt issues hitting a record this year. Just before last week’s third additional budget, the International Monetary Fund saw public debt reach 266% of gross domestic product this year, with a budget deficit of 14.2% of GDP.
Virus deficiency
Japan’s flow is rising under pandemic stress
Sources: OECD, Bloomberg
The Suga administration announced this month over $ 700 billion as a stimulus, partly funded by next year’s budget. The package aims to contain the virus while helping to transition the economy into a post-Covid world.
The Japanese suga doubles its travel bet in a $ 700 billion package
Daily cases of the Japanese virus have doubled to 3,000 in recent days. Suga has already been forced to declare a temporary suspension of a travel subsidy program it has promoted, robbing it of an effective way to stimulate an economy that some economists see as threatened by a recession.
Regarding monetary policy, the Bank of Japan maintained its ultra-light position on Friday, also extending its coronavirus response program by six months. The bank also surprised the market by promising a policy review without a full review, leaving economists and investors three months to speculate on possible changes.
Here is the breakdown of next year’s budget expenditures:
- 66.9 trillion yen in general expenses, including:
- About 35.8 trillion yen for social security
- 5 trillion yen for a coronavirus response fund
- Debt service of 23.8 trillion yen
- 16 trillion yen in transfers to regional and local governments.
In terms of revenues, bond issuance is planned to rise to the highest level since the global financial crisis. Debt income will increase to 40.9% of total revenue, compared to 31.7% in 2020. The Ministry of Finance intends to offer a total value of 236 trillion yen in the next fiscal year, most of which will be refinancing bonds. .
Here is the breakdown of projected revenues for fiscal year 2021:
- 57.4 trillion yen in tax revenue.
- 43.6 trillion yen in revenue from new bond issues
- 5.6 trillion yen from other sources.
(The comments of the Minister of Finance, the new diagram, the IMF fiscal deficit forecast are added.)