Japan has set a spending target of around 97 trillion yen ($858 billion) for fiscal 2017, letting policymakers now turn their attention to securing funding without racking up too much new debt.
The Council on Economic and Fiscal Policy, led by Prime Minister Shinzo Abe, approved guidelines for the fiscal 2017 budget Friday, sending planning into full swing. The prime minister called for particular focus on such policy priorities as child care and nursing care as well as research and development spending. The goal is for the cabinet to approve a draft budget in late December.
The targeted 97 trillion yen or so could make the fiscal 2017 plan the largest ever, beating out this fiscal year’s 96.7 trillion yen. Social security spending is poised to climb 500 billion yen on the impact of population aging, making it the largest factor in the overall increase. Some 300 billion yen in new spending is planned to expand such programs as child and nursing care. General-account spending, which includes social security costs along with such projects as public works, is seen rising 530 billion yen to the lower 58 trillion yen range.
Savings elsewhere will help combat this rise somewhat. The Bank of Japan’s negative interest rates, for example, mean lower interest payments on the national debt. The Ministry of Internal Affairs and Communications and the Ministry of Finance continue to haggle over how much national tax revenue should be handed over to local governments.
The goal now is to keep new-bond issuance to a minimum. The government has managed to reduce bond floats for six fiscal years running. Increased tax revenue accompanying the economic recovery helped the Abe government cut debt issuance by around 8 trillion yen from fiscal 2013 to fiscal 2016.
But tax receipts from April to September of this year dropped below the year-earlier level for the first time in seven years amid such factors as a strong yen, raising concerns over a budget shortfall. While movements in the currency have turned around of late, further debt reduction could still prove a challenge.