Dec 25 2024: Japan’s government is set to unveil a record 115.5 trillion yen ($734 billion) budget for the fiscal year starting in April, driven by rising social security and debt-servicing costs. This development adds pressure to Japan’s position as the most indebted country among industrialized nations, according to a draft plan reviewed by Reuters.
The unprecedented budget comes as the Bank of Japan pivots away from its decade-long stimulus measures, signaling an end to the ultra-low borrowing costs that had previously supported government debt.
Despite the rising expenditure, the government aims to demonstrate fiscal responsibility by reducing new bond issuance to 28.6 trillion yen, down from the initially planned 35.4 trillion yen for the current year. This marks the first time in 17 years that new bond issuance will fall below 30 trillion yen.
Tax revenues are projected to reach a record 78.4 trillion yen, fueled by a recovery in corporate profits. However, debt-servicing costs are also set to rise, with the assumed interest rate increasing to 2% from the current 1.9%. This will push debt-related expenditures, including interest payments and redemptions, to 28.2 trillion yen, compared to 27 trillion yen in the current fiscal year.
The budget underscores the challenges Japan faces as it balances fiscal discipline with the demands of an aging population and economic recovery.
(Exchange rate: $1 = 157.2900 yen)
