Japan’s 2017 budget request tops 100trln yen as growth sputters

TOKYO: Annual budget requests from Japan´s government offices have topped 100 trillion yen ($963.76 billion) for a third straight fiscal year, part of it for stimulus spending to revive flagging growth, a draft obtained by Reuters showed.

The requests, to be announced later on Tuesday, totalled 101.4707 trillion yen for fiscal 2017, compared with a record 102.4099 trillion yen requested for the current fiscal year´s initial budget.

The relatively high spending underscores a challenge for Japan as it tries to balance growth priorities with the need to rein in a heavy debt burden. The spending requests got a boost from Prime Minister Shinzo Abe´s pro-growth fiscal policy, backed by rock-bottom borrowing costs under the Bank of Japan´s negative interest rate policy.

The finance ministry will scrutinise the budget requests and trim them before it drafts an annual budget in December. This fiscal year´s initial budget hit a record 96.7 trillion yen.

Japan must rein in the industrial world´s heaviest debt burden at more than twice the size of its economy, while facing the need to revive the stalling economy.

Of the total budget requests, debt-servicing costs accounted for 24.6174 trillion yen, while non-debt-servicing outlay came to 76.8533 trillion yen. Reflecting the bulging cost of social security for a fast-ageing society, budget request by the welfare ministry hit 31.1217 trillion yen, by far the highest among government offices.

Abe´s planned stimulus package worth 28 trillion yen, a portion of which will be earmarked in the next fiscal year´s budget, also pushed up the total budget requests. As authorities continue with their efforts to revive the world´s third largest economy, spending request for priority areas for growth hit 3.8135 trillion yen.

The government has stuck to its plan to balance the primary budget, excluding new bond sales and debt servicing, by fiscal 2020, despite a delay in the sales tax hike to 10 percent by 2 1/2 years to October 2019 due to a fragile economic recovery.

But there are doubts Tokyo can hit its budget goals given the frustratingly slow pace of economic growth. On top of the annual budget, request for lending programme reached 16.5209 trillion yen, up about 3 trillion yen from this fiscal year´s initial plan, helped by the BOJ´s negative rate policy lowering long-term financing costs for high-speed maglev trains and other infrastructure projects.