Written by Makiko Yamazaki
TOKYO (Reuters) – Japanese Prime Minister Shigeru Ishiba's government on Friday approved a record $730 billion budget for the next fiscal year, while setting new bond issuance at 17-year lows on the back of record tax revenues.
The budget for the fiscal year that begins in April is estimated at about 115.5 trillion yen ($732.36 billion), an increase of 2.6% from the current year’s budget of 112.6 trillion yen, driven by debt service and social security costs.
But record tax revenues are likely to help bring new bond issuance down to 28.6 trillion yen, the lowest level since 2008.
As a result, the debt reliance ratio will be 24.8%, meaning that new bond sales represent a quarter of the budget. This represents the first drop below 30% since 1998.
Japanese Finance Minister Katsunobu Kato said in a press conference on Friday that the government “will continue to work to achieve economic transformation and financial health.”
He also said the government is committed to its target of achieving a primary budget surplus by next financial year, although a detailed estimate will not be released until early 2025.
However, the budget plan may have difficulty getting passed in parliament, as Prime Minister Shigeru Ishiba's minority government needs the support of opposition parties to pass the legislation.
One of the main opposition parties is demanding a tougher increase in the income tax threshold as part of effective tax cuts, which could hurt tax revenues.
