Japan is set to spend a historic $730 billion in the next fiscal year, with plans approved by the cabinet on Friday. Despite this, the country is managing to limit reliance on new bonds to a 17-year low, buoyed by unprecedented tax collections.
Starting in April, Japan will operate on a 115.5 trillion yen ($732.36 billion) budget, marking a 2.6% increase over the previous fiscal year. This rise is primarily propelled by growing costs in social security and debt servicing. However, anticipated record-high tax revenues enable a curious fiscal twist: new bond issuance is slated to drop to 28.6 trillion yen, marking its lowest level since 2008.
With the debt reliance ratio falling below 30% for the first time in 25 years, Japan’s fiscal strategy represents a delicate balance. New bond sales account for a mere quarter of the budget at 24.8%. Yet, Prime Minister Shigeru Ishiba’s government may face hurdles in parliament. Without a majority since October’s elections, the ruling coalition requires opposition support.
Key opposition figures push for significant tax threshold adjustments, which could reduce government revenue, complicating the fiscal landscape.
