TOKYO: Japan was on Thursday expected to pass its biggest-ever budget, a $937-billion spending package aimed at propping up growth as consumers brace for the country’s first sales tax hike in over 15 years.
Lawmakers in the upper house of parliament, controlled by the ruling Liberal Democratic Party, would vote on the package later Thursday. The 95.88 trillion yen ($937.4-billion) budget for the fiscal year starting in April was expected to easily pass, after the lower house approved it last month.
The new budget comes as Tokyo pushes for speedy implementation of a $50-billion stimulus package specially designed to protect Japan’s fragile economic recovery as sales taxes rise to 8.0 percent from 5.0 percent on April 1, the first hike since the late nineties.
The rate rise is seen as crucial to bringing down Japan’s eye-watering national debt—proportionately the heaviest debt burden among wealthy nations.
But there are fears it will derail Prime Minister Shinzo Abe’s policy blitz, dubbed Abenomics, which aimed at kickstarting the world’s third-largest economy after it suffered years of growth-denting deflation.
“I would like to continue making strong efforts to end deflation and grow the economy,” the conservative Abe told a parliamentary session Thursday.
The premier, who swept to power in late 2012 on a ticket to rescue Japan’s long-lumbering economy, was to hold a press briefing Thursday evening, after lawmakers vote on the budget.
The proposed package—up from 92.61 trillion yen for the current fiscal year—is seen as key to paying for Japan’s snowballing health and social welfare costs. The country’s rapidly ageing population is putting pressure on the public purse, while low birth rates are threatening to create a demographic time bomb for the heavily indebted nation.
Japan’s projected primary balance deficit—the shortfall between what the government takes in and what it spends, apart from debt-servicing—is expected to shrink by 5.2 trillion yen to 18.0 trillion yen.
That means Japan’s national debt, now more than twice the size of the economy, will continue to rise, but at a slower pace.
Public spending projects are part of the proposed budget as well as plans to upgrade Japan’s defense forces, as China bulks up its military and fears remain over North Korea’s nuclear arms potential.