Japan’s FY 2019 Draft Budget Likely to Total 101 T. Yen

December 13, 2018

Tokyo--The Japanese government plans to draw up a record draft general-account budget of around 101 trillion yen for fiscal 2019, informed sources said Thursday.

The initial budget scale will surpass 100 trillion yen for the first time ever due in part to ballooning spending on measures to cushion the impact of the consumption tax hike from the current 8 pct to 10 pct in October 2019, according to the sources.

Tax revenue in the fiscal year starting in April 2019 is estimated to reach a record high of some 62 trillion yen.

But it is uncertain whether progress will be made in efforts to restore fiscal health amid relentless spending increases.

With Prime Minister Shinzo Abe adopting the idea that there can be no fiscal consolidation without economic revitalization, his administration is poised to take every possible measure to prevent the economy from losing its momentum due to the consumption tax hike.

The government aims to adopt the fiscal 2019 draft budget at a cabinet meeting on Dec. 21.

Total expenditures are likely to surpass the fiscal 2018 spending of 97,712.8 billion yen on an initial budget basis, which was a record high, by about 3 trillion yen.

In preparation for the consumption tax increase, the government will implement economic pump-priming measures worth around 2 trillion yen.

For example, the government will grant points equivalent to up to 5 pct of cashless payments at small retailers and issue gift certificates with "premium" coupons for low-income earners to allow them to purchase more than they pay for the certificates.

In addition, the government plans to step up measures to make key infrastructures disaster-resistant, based on lessons learned from a series of natural disasters that hit Japan this summer.

Natural growth in social security costs from the aging population will be curbed by some 100 billion yen through such measures as extraordinary drug price revisions. Still, the government is expected to see the costs increase by around 500 billion yen from 32,973.2 billion yen in fiscal 2018.

Consumption tax revenues will be partially used to make preschool education free of charge in principle.

As Japan is facing the challenges of coping with cyberattacks and threats from North Korea and China, defense spending is likely to increase from 5,191.1 billion yen in the previous year.

Debt-servicing costs, which came to 23,302 billion yen in fiscal 2018, are expected to reach around 23.5 trillion yen.

On the revenue side, the government anticipates a tax income increase of nearly 3 trillion yen thanks to the consumption tax hike and a projected economic recovery.

However, it is unclear whether the government will be able to cover its spending growth with rises in tax and nontax revenues.

Some observers say the issuance amount of new Japanese government bonds, which totaled 33,692.2 billion yen in the year before, may turn to an increase for the first time in nine years.

Finance Minister Taro Aso plans to have final negotiations on the fiscal 2019 draft budget with other cabinet ministers early next week. Jiji Press