Japanese Prime Minister Shigeru Ishiba's Cabinet Approves Record Budget

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 in 17 years owing to record tax revenue.

The budget for the fiscal year starting in April is estimated at 115.5 trillion yen ($732.36 billion), reflecting a 2.6% increase from the current year's 112.6 trillion yen, driven by debt-servicing and social security costs.

However, significant tax revenue is expected to help cap new bond issuance to 28.6 trillion yen, the lowest since 2008. Consequently, the debt dependence ratio will be 24.8%, meaning new bond sales account for a quarter of the budget. This marks the first drop below 30% since 1998.

Japanese Finance Minister Katsunobu Kato announced in a news conference on Friday that the government "will continue working to achieve both economic turnaround and fiscal health." He affirmed the government's commitment to achieving a primary budget surplus by the next fiscal year, though detailed estimates will not be available until early 2025.

However, the budget plan faces challenges in parliament, as Prime Minister Shigeru Ishiba's minority government requires support from opposition parties to pass the legislation. A key opposition party is advocating for a more aggressive adjustment of the income tax threshold in tax cuts, which could potentially affect tax revenue.