Japan's cabinet approves record US$938 bln draft FY 2020 budget

Saturday, 2019-12-21 14:23:57
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Japan’s population began shrinking several years ago and is rapidly aging.
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The Cabinet of Prime Minister Shinzo Abe on December 20 approved a draft budget for fiscal 2020, aimed at covering ballooning social security costs amid a rapidly aging society and dealing with the fallout from a consumption tax hike that has seen private and public consumption wane.

The JPY102.66 trillion (US$938.5 billion) budget marks the eighth consecutive year Japan has drafted a record budget, with spending topping JPY100 trillion for the second straight year as costs related to the nation's demographic crisis, involving a rapidly aging and shrinking population, continue to skyrocket.

The draft budget, comprising record defense spending and allocations to cushion the downside effects of the October 1 sales tax hike from 8 to 10 percent, will be submitted to the Diet in January next year.

As for spending on defense, which marks a sixth straight record high, a total of JPY5.31 trillion has been earmarked to cover outlays on Japan hosting U.S. forces here, as well as allocations related to spending on cyber space, outer space and other defense-related expenses.

Aimed at cushioning the blow from October's sales tax hike, which has seen consumption slump and sentiment among businesses worsen, the draft budget comprises JPY1.78 trillion in stimulus measures, which include a shopping rewards point program aimed at spurring consumer spending.

More than a third of the draft budget will be allocated to cover rising social security costs amid the nation's demographic crisis, with JPY35.86 trillion earmarked, marking a JPY1.73 trillion increase from a year earlier.

In a bid to better the nation's dire fiscal health, the government will reduce new bond issuance for a 10th successive year and issue JPY104.3 billion less debt than a year earlier, at JPY32.56 trillion.

"The budget is aimed at achieving both economic recovery and fiscal consolidation," Finance Minister Taro Aso told a news conference after the cabinet approved the draft budget.

"Social security will be improved through the use of increased revenue from the consumption tax hike from 8 percent to 10 percent implemented in October," Aso added, with reference to overall tax revenue estimated to reach JPY63.51 trillion, JPY1.02 trillion higher than the draft budget for fiscal 2019.