Japan's Cabinet approved on Monday a largest-ever 106.61 trillion yen ($1.03 trillion) draft budget for fiscal 2021, as the country grapples with the coronavirus pandemic, its rapidly aging society and new security challenges. According to Kyodo news agency, Japan's budget is growing for the ninth consecutive year. The budget increase is provided by collection of taxes and sale of securities, however it is noted that 40.9 percent of the budget will be funded by debt, compared with 31.7 percent in the current year. Among the policy spending, 5 trillion yen will be set aside for reserve funds for future response to the global health crisis. The funds can be spent without a breakdown of expenditures and further Diet approval. Japan's defense budget will total around 5.34 trillion yen, up 0.5 percent from a year earlier to hit a record high for the seventh straight year, as it increases efforts to beef up capabilities in new domains such as cyberspace and outer space. Growing for the ninth successive year, the defense budget also included 33.5 billion yen for the development of Japan-made standoff missiles capable of attacking enemy vessels from outside their firing range. To finance the budget, new bond issuances will soar 11.04 trillion yen from the current year's initial plan to 43.60 trillion yen, the first year-on-year rise on an initial basis since fiscal 2010 when the economy was struggling in the aftermath of the global financial crisis. Tax revenues, which were increasing in recent years due to strong corporate earnings and tax hikes, are estimated at 57.45 trillion yen, larger than the downwardly revised estimate of 55.13 trillion yen in fiscal 2020. As a result, 40.9 percent of the budget will be funded by debt, compared with 31.7 percent in the current year. The ratio could be bigger if Prime Minister Yoshihide Suga opts to take additional measures against the pandemic by supplementary budgets. The draft of the initial general-account budget, which will be submitted to an ordinary parliamentary session to convene in January, includes 23.76 trillion yen in debt-servicing costs. "Amid the coronavirus spread, the hardest part was that we had to strike a balance among preventing infections from spreading, revitalizing the economy and restoring fiscal health," Finance Minister Taro Aso told a press conference after the Cabinet approval. Social security outlays will rise to a record 35.84 trillion yen, accounting for about a third of the whole budget, as a rapidly graying population has led to ballooning health care and pension costs. The rise in social security spending was expected to be about 480 billion yen, but the government will reduce it to around 350 billion yen by measures such as lowering drug prices. — SPA/Kyodo
