Japan’s record $940 billion budget may help Covid-hit economy, fiscal discipline doubts – Henry Club – India Times English News

The Japanese cabinet on Friday approved an annual budget of $940 billion, a record for the tenth year in a row that priority has been given. response to fighting covid-19 and the purpose of development and wealth distribution of the prime minister.

The 107.6 trillion yen ($941.55 billion) budget for the fiscal year beginning April 2022 is Japan’s largest initial spending plan, underscoring the priority of reviving the pandemic-hit economy over a return to long-term financial health.

However, when asked whether to fight the heavy spending COVID-19 The pandemic could force the government to change its primary balancing target, with Finance Minister Shunichi Suzuki saying, “I don’t think so, for now.”

Suzuki renewed its pledge to stick to the target, saying it was important to continue efforts to improve public finances as a cornerstone of Japan’s credibility.

Prime Minister Fumio Kishida’s first budget, which will have to be approved by parliament by the end of the current fiscal year in March, comes days after the body approved 36 trillion yen of record additional stimulus spending to aid the recovery of Covid-19. Is. Is. Is.

According to analysts, the larger spending was meant to undermine fiscal discipline among Japanese policymakers, who rely on the Bank of Japan’s ultra-lax monetary policy to keep borrowing costs down.

“Politicians show no signs of attempting to repay government debt,” said Yasunari Ueno, chief market economist at Mizuho Securities. “Lack of fiscal discipline is the biggest side effect of the BoJ’s massive monetary easing.”

The budget includes 5 trillion yen for the emergency cost of COVID-19, a record defense outlay of 5.37 trillion yen, the largest welfare cost of 36.3 trillion yen, and 24.3 trillion yen for debt service.

Public debt in Japan, the world’s third largest economy, is more than twice the size of its $5 trillion economy, the heaviest of the industrialized nations.

Kishida has promised to improve public finances in the long run and the budget expects new borrowing to amount to 36.9 trillion yen next year, down from an initial plan of 43.6 trillion yen this year.

Lower borrowing will be replaced by higher tax revenues, which saw a record 65.2 trillion yen for the first time in two years, as the easing of economic activity eased Covid-19 curbs.

The government estimates that the real economic growth in the next fiscal will be 3.2 per cent, which is higher than the earlier estimate of 2.2 per cent. Estimates form the basis of budget planning.

But with debt still at 34.3% of the budget, it will be difficult to achieve the primary budget surplus by the fiscal year 2025/26 as per the government’s target.

The primary budget deficit, which does not include new bond sales and debt servicing, is seen in the next fiscal year at 13 trillion yen, higher than this year’s estimate of 20 trillion, but still far from the government’s target. . ,