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Japan's central bank tweaked its longstanding monetary easing programme on December 20, in a surprise move that saw the yen strengthen quickly against the dollar while Tokyo stock markets fell. Image Credit: AFP

Tokyo: Japan’s cabinet approved a record initial budget for the next fiscal year, piling more borrowing onto the the country’s massive debt load.

For the year starting in April 2023, Prime Minister Fumio Kishida’s cabinet signed off on 114.4 trillion yen ($863 billion) in overall spending, the finance ministry said Friday. The amount represents a solid 6.3 per cent jump from the previous year’s initial budget.

Next year’s spending may still increase as the year progresses given a tendency for the government to issue extra budgets.

The majority of the spending will be funded by record tax revenue of 69.4 trillion yen, with some additional funding sources. But the costs will ultimately require another 35.6 trillion yen of borrowing.

The fresh bond issuance edged down from this year’s 36.9 trillion yen, but it still accounts for around one-third of budget funding, adding to the developed world’s heaviest debt load.

On the expenditure side, the largest portion will go to social security needs, followed by debt-servicing costs and transfers to regional and local governments. Another major outlay is 6.8 trillion yen of ramped up defense-related spending.

An extra 3.4 trillion yen will go to a defense fund that will be used in fiscal 2024 onward.

Actual spending will likely balloon from the initial budget. This year, Prime Minister Fumio Kishida ordered two additional budgets, requiring an extra 25.6 trillion yen of new debt issuance for funding.