Japan Prime Minister Yoshihide Suga’s cabinet on December 21 approved a record-high $51.7 billion or ¥5.34 trillion draft budget for the fiscal year of 2021 amid the COVID-19 pandemic and security challenges. The rise in military spending would be reportedly directed towards the development of an advanced stealth fighter and longer-range anti-ship missile to counter the growing military power of China. This year’s military budget reportedly leads this year’s by 1.1%.
Meanwhile, As per the Japan Times report, the cabinet approved the budget for the fiscal year 2021 of $1.03 trillion or ¥106.61 trillion for the year starting in April which will also exceed the fiscal 2020’s initial budget with a huge margin and this has further budded concerns over more deterioration of Japan’s fiscal health which is reportedly among the major economies. This is also the ninth consecutive year for Japanese Cabinet to approve the record-high funding approval and topping ¥100 trillion for the third year in a row.
Amid political foes, China is reportedly also planning to raise its military spending 6.6% in 2020 which is the smallest in nearly 30 years. Japan is buying longer-range missiles and even reportedly considering arming and training its military to strike distant land targets including China, North Korea among other nations.
To finance the record-high budget, the new bond issuances will reportedly soar ¥11.04 trillion from the current year’s initial plan to nearly ¥43.60 trillion, which is also the first year-on-year rise in 11 years on an initial basis. It will almost impact the already increasing tax revenues which are reportedly estimated at ¥57.45 trillion, greater than the downwardly revised estimate of ¥55.13 trillion this year.
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More than 40% budget will be funded by debt
In addition to increasing tax revenues, as per reports, 40.9% of Japan’s budget will be funded with debt, which is again greater than the 31.7% in the current year. Moreover, the ratio could be even bigger if Japan PM Suga chooses to take additional measures against the COVID-19 pandemic through the supplementary budgets. The draft of the record-high budget for the military will be submitted to an ordinary Diet session set to convene in January including ¥23.76 trillion in debt-servicing costs.
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