FY 2018 draft budget likely to total 97.8 trillion yen

December 16, 2017

Tokyo- The Japanese government is making arrangements to draw up a record draft general-account budget of about 97.8 trillion yen for fiscal 2018, which starts in April, Jiji Press learned Friday.

The budget scale, up from the 97,454.7 billion yen for the fiscal 2017 initial budget, will mark an all-time high for the sixth straight year primarily due to an increase in social security-related spending, according to informed sources.

With tax revenue estimated at a 27-year high of 59.1 trillion yen, the issuance amount of new Japanese government bonds, excluding refunding debt, is expected to fall some 400 billion yen from the fiscal 2017 budget to between 33.5 trillion yen and less than 34 trillion yen, down for an eighth consecutive year.

The government plans to adopt the fiscal 2018 draft budget at a cabinet meeting on Dec. 22. Prime Minister Shinzo Abe hopes to highlight both tax revenue growth brought about by an economic recovery and progress in fiscal reconstruction through the reduction of JGB issuance, the sources said.

Social security expenditures are likely to be pushed up by an increase in medical costs in the aging society, while defense spending is expected to hit a record high of some 5.2 trillion yen. Including them, general expenditures, or spending to finance policy measures, are estimated to rise above 58.5 trillion yen, the sources said.

Debt-servicing costs are likely to total around 23.5 trillion yen, down slightly from the fiscal 2017 budget. Reflecting low market interest rates, the interest rate assumed in the budget blueprint will be 1.1 pct, down from the 1.2 percent used in the phase of budget requests from ministries and agencies.

The estimated tax revenue of 59.1 trillion yen will be substantially higher than the 57,712 billion yen in the fiscal 2017 budget and mark the highest level since the 59,820.3 billion yen in the fiscal 1991 account settlement, as the government plans to raise its real economic growth projection for fiscal 2018 to 1.8 percent from the 1.4 percent made in July. The rise in tax revenue will likely be led by corporate tax revenue.

Thanks to the robust revenue, the issuance amount of new JGBs is expected to fall below 34 trillion yen for the first time in nine years on an initial budget basis.

Tax revenue grants to local governments will be reduced to somewhere between 15.4 trillion yen and 15.5 trillion yen, the first drop in two years.

Finance Minister Taro Aso plans to hold negotiations with related cabinet ministers on Monday on spending items that have yet to be sorted out. Jiji Press