Japan Compiles Record $1 Trillion Budget For Fiscal 2021

(Bloomberg) -- Japan has put together a record budget for next fiscal year just days after unveiling a third extra budget as Prime Minister Yoshihide Suga’s government looks to shore up the economy and allocate spending to contain the virus amid record numbers of infections.

Spending by the Japanese government will increase to 106.6 trillion yen ($1 trillion) in the year starting April, according to a draft of the annual budget obtained by Bloomberg. Outlays on social security will account for about 54% of spending outside of debt servicing and transfers to regional governments, the draft showed.

The official announcement of the figures is expected next week.

The annual budget will fund some of the spending for the Suga administration’s recent stimulus package of more than $700 billion. Details of a third extra budget for the current fiscal year were announced earlier this week, including spending of 21.8 trillion yen, most of which will go toward funding the stimulus package.

Like many governments around the world, Japan finds itself in a tight spot as it tries to contain the virus, while also maintaining a recovery in the economy.

National Covid-19 cases have recently surpassed daily counts of 3,000, forcing Suga to temporarily stop a major travel subsidy program he’d promoted to stimulate spending and support the tourism industry and regional economies.

A breakdown of expenditures from the draft show:

• 66.9 trillion yen in general spending, including around 35.8 trillion yen for social security
• Debt servicing of 23.8 trillion yen
• 16 trillion yen in transfers to regional and local governments.

On the income side, bond issuance is planned to show a significant rise. Income derived from debt will rise to 40.9% of total revenue.

A breakdown of projected income for fiscal 2021 shows:

• 57.5 trillion yen in tax revenue.
• 43.6 trillion yen in revenue from bond issuance
• 5.6 trillion yen from other sources.

The initial budget is unlikely to give a full picture of Japan’s spending for next year given the likelihood of extra budgets to support the pandemic hit economy.

©2020 Bloomberg L.P.