Almost a quarter of Japan budget revenue goes to paying public debt

TOKYO, 20 Dec 2019:

The government of Japan today announced its draft budget for the next fiscal year – which includes a 1.2% increase in expenditure compared to 2019 and plans to allocate nearly 23% of revenue to cover public debt service.

Prime minister Shinzo Abe’s cabinet is set to table before the parliament a draft budget of ¥102.66 trillion for the fiscal year that begins in April next.

The draft announced at the end of a meeting represents a 1.2% annual increase in the expenditure compared to the current fiscal year ending 31 March 2020.

Chief cabinet secretary Yoshihide Suga justified in a press conference the increase owing to higher spending on social security and stimulus policies to boost the economy.

Of the total budget amount, 77.3% will be used to cover government expenses and 22.7% will be allocated towards the public debt service of Japan, the world’s third largest economy, after the US and China.

At the end of 2018, Japan’s public debt amounted to 201% of its nominal gross domestic product (GDP), the highest percentage among developed countries.

The 2020 draft budget envisages the issuance of additional government debt bonds worth ¥32.56 trillion – which is 0.32% less than the figure planned for the current fiscal year.

The data, provided by the Ministry of Finance, implies the tenth consecutive annual reduction in the issuance of additional government debt bonds.

But if the refinancing of the current financial instruments is included, the figure amounts to ¥153.46 trillion, representing the first annual increase in six years.

One-third of the 2020 budget will be allocated to cover the costs of social security, which have been rising in Japan due to a progressively aging population and a declining birth rate, a major challenge faced by the Abe government.

The draft also seeks an annual increase of 1.1% in defence spending, amounting to ¥5.31 trillion, marking the seventh consecutive increase in this field.

As part of measures to boost the economy, the government has proposed to allocate a total of ¥6.86 trillion for infrastructure works.

On Dec 5, the Japanese government approved a three-year plan worth ¥26 trillion to stimulate economic growth and improve infrastructure for disaster preparedness.

– EFE