Japan’s spending on government policy initiatives for the next fiscal year is likely to expand to a record high of around 74 trillion yen ($646.76 billion) with social security and defense expenditures soaring, a government source says.
Grants to local governments are also expected to increase as Prime Minister Shinzo Abe’s administration is eager to galvanize regional economies, while expenses for the agriculture sector are set to be cut, the source said.
Government spending—including expenditures for public works projects and social security programs but excluding debt-servicing costs—reached 73.11 trillion yen in fiscal 2016 through March next year.
Abe’s cabinet plans to approve both an initial budget for fiscal 2017 and an extra budget for the current fiscal year on Dec 22, Finance Minister Taro Aso said Friday.
An initial state budget is often approved by the cabinet on Dec 24 every year in Japan. This year, the schedule was brought forward, apparently in consideration of Prime Minister Shinzo Abe’s planned trip to Pearl Harbor in Hawaii from Dec 26.
The total of the initial budget for fiscal 2017 is expected to come to a record high of 97 trillion yen.
As tax revenues may shrink against a backdrop of a slowing economy, the cabinet is likely to increase issuing new government bonds for the first time in seven years amid revenue shortfalls, the source said.
The government is, meanwhile, seeking to rein in year-on-year growth in social security costs by reducing an initial budget request of 640 billion yen ($5.6 billion) to around 500 billion yen in the fiscal 2017 budget.
Curbing ballooning social security costs is a challenge for Japan’s graying society.
Earlier this year, the Ministry of Internal Affairs and Communications, which oversees municipalities, requested 16.01 trillion yen for grants to local governments.
The Defense Ministry also asked for a record-high 5.17 trillion yen to cope with security risks like those posed by ballistic missiles launched by North Korea.
Tax revenue for the current fiscal year is expected to fall short of the government’s initial estimate, hurt by the yen’s strength that weighs on corporate tax revenue. However, Aso said it is still difficult to make a projection.
continued to fall from 4.8-5.2 percent in 2001-2005 to 3-3.2 percent in 2015-2018. BOK officials are reportedly to re-estimate the figure amid lowered labor productivity.