Daily Management Review

Record $1.03 Trillion Budget For Fiscal 2021 Passed By Japan Amid Covis-19 Pain


Record $1.03 Trillion Budget For Fiscal 2021 Passed By Japan Amid Covis-19 Pain
Japan’s Ministry of Finance announced the approval of a record $1.03 trillion budget draft for the next fiscal year starting in April 2021 by the country’s cabinet even as the public finances of the country is under pressure because of the novel coronavirus pandemic’s economic impact and the stimulus spending to ease that economic impact.
This 106.6 trillion yen ($1.03 trillion) annual budget is 4 per cent higher than the initial budget for the current fiscal. This is the ninth straight year that the country’s annual budget has been rising. About 40.9 per cent of the 106.6 trillion yen annual budget will ne made up of debts worth 43.6 trillion yen making up 40.9 per cent of revenue.
A burst of monetary and fiscal stimulus to prevent a deep recession form getting prolonged by the pandemic has been implemented by policymakers and governments globally - from Europe to America. The global health crisis has severely hit trade with international borders being shut and millions losing jobs.
The focus of the Japanese government under Prime Minister Yoshihide Suga currently has been to contain the pandemic and reignite growth to generate more tax revenues which has resulted in side lining of fiscal reform in the country.
The new record budget however has to get passed by the Japanese parliament early next year.
The next year’s annual budget will be rolled out together with a third extra budget for this fiscal year which is a part of a combined 15-month budget created for making seamless spending to cushion the pandemic hit and in support of achieving carbon neutrality and digital transformation of the economy.
For Japan, fiscal reform is considered to be a more urgent need of the hour compared to other developed economies as the country’s public debt currently is more than double the size of the country’s $5 trillion economy which is the worst in the industrial world by far.
According to government’s forecast, the economy will grow at 4 per cent of the real GDP for the next fiscal year which is higher than economists’ forecast of a 3.4 per cent growth for the economy. However if the projected growth target is not achieved by the economy, it would mean reduced tax income for the government and consequent more borrowing to plug the budget gap.
The primary budget deficit as declared by the government for its 2021 fiscal year is expected to be at 20.4 trillion yen, excluding new bond sales and debt servicing, which will be double of the estimates of deficit for the current year. That will make it very difficult for the government to balance the budget.