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Japan Readies $800b Budget to Boost Growth
World Economy

Japan Readies $800b Budget to Boost Growth

The Japanese government is planning nearly $800 billion of record spending in the next fiscal year to shore up a fragile economy, with Tokyo also promising to rein in a bulging debt burden in an expansionary budget set to be unveiled this week.
Finance Minister Taro Aso on Tuesday vowed to boost growth and achieve fiscal reform with government budget spending worth 96.7 trillion yen $728.97 billion) for the next fiscal year that starts in April. This is up a touch from the 96.3 billion yen spending set for the current year's initial budget.
Confirming figures reported by Reuters last week, Aso said tax revenue is estimated at a 25-year high of 57.6 trillion yen in fiscal 2016.
That revenue assumption, based on an expected economic growth of nominal 3.1% and real 1.7%, will allow the government to slash new bond issuance by 2.4 trillion yen from this year to 34.4 trillion yen, he said.
The budget plans signal a growing commitment by Prime Minister Shinzo Abe to rein in the industrial world's heaviest debt burden even as he continues to pump-prime the economy via a cocktail of expansionary policies.
"This budget is appropriate for marking the first step towards our new fiscal plan while we aim for economic revival and fiscal consolidation at the same time," Aso told reporters after he presented the budget figures at a meeting between government officials and ruling party lawmakers.
Making Progress
Aso said the government is making progress towards achieving a primary budget surplus–excluding new bond sales and debt servicing–by the fiscal year ending March 2021.
The decreasing level of new borrowing and rising tax income on the back of corporate profits will bring Japan's fiscal dependence on bond financing to 35.6% in fiscal 2016–the lowest since fiscal 2008, just before the global financial crisis dealt a blow to the world's third largest economy.
Still, the level of bond financing remains relatively high.
"Abe administration has done the utmost to pursue both economic revival and fiscal reform," Abe told the meeting, noting that tax revenue has risen by 15 trillion yen and bond issue has fallen by 10 trillion yen since he took office in late 2012. The results were clear. Together with everyone, I want to follow this path with confidence."
The draft budget is expected to be endorsed by the cabinet on Thursday and sent to parliament for approval early next year.
TPP to Give Boost?
Japan’s government has estimated the Trans-Pacific Partnership will boost the economy by 14 trillion yen or about 3 percentage points, over four times more than its initial calculation, the Nikkei business daily said on Tuesday.
In March 2013, the cabinet office said joining the TPP would boost gross domestic product by 3.2 trillion yen or 0.66 percentage point based on the assumption that all tariffs would be scrapped immediately after enactment.
The new estimate included the impact of elements such as common investment rules and easing regulation, the Nikkei reported.
Also, the TPP’s negative impact on agriculture will likely be less than initially calculated as not all tariffs on farm products will be eliminated and because there are farm products whose tariffs will be scrapped over a lengthy period, the newspaper said.
The government plans to spend about 340 billion yen to ease the impact on farmers and help firms be more competitive. It is scheduled to announce its new estimate of the economic impact of the TPP this week.

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