By Makiko Yamazaki
TOKYO (Reuters) – Japanese Prime Minister Shigeru Ishiba’s cabinet on Friday approved a record $730 billion budget for the next fiscal year, while limiting new bond issuance to the lowest level in 17 years thanks to record tax revenues.
However, Ishiba’s minority government faces a tough political battle with opposition parties to pass the budget in parliament early next year, which could damage its already weak position in the polls.
The budget for the fiscal year starting in April is estimated at 115.5 trillion yen ($732.36 billion), up 2.6% from the current year’s 112.6 trillion yen, boosted by the service of the debt and social security costs.
But record tax revenues are likely to help reduce new bond issuance to 28.6 trillion yen, the lowest since 2008.
As a result, the debt dependency ratio will stand at 24.8%, meaning that new bond sales will account for a quarter of the budget. It represents the first drop below 30% since 1998.
Japanese Finance Minister Katsunobu Kato said at a news conference Friday that the government “will continue to work to achieve both economic turnaround and fiscal health.”
He also said the government is sticking to its goal of achieving a primary budget surplus for the next fiscal year, although a detailed estimate will not be released until early 2025.
As the budget plan needs the support of opposition parties to be approved by parliament, Ishiba’s minority government could be forced to give in to their demands and revise part of the plan during parliamentary deliberations.
The main opposition party, the People’s Democratic Party (PDP), calls for a more aggressive lifting of the income tax threshold through effective tax cuts, which could hurt tax revenues.