World Insights: Japan’s Diet approves record high budget for fiscal 2021, financial repairs a long way to go

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TOKYO, March 26 (Xinhua) — Japan’s Diet on Friday enacted a record high budget of 106.61 trillion yen (976 billion U.S. dollars) for fiscal 2021 to support measures against the fallout amid the COVID-19 pandemic and finance its increasing social security and defense costs, forgoing fiscal consolidation once again.

The new budget, to start on April 1, was first passed by the House of Representatives in early March and approved by the House of Councilors on Friday. Both houses are controlled by the ruling coalition of the Liberal Democratic Party and Komeito.

Japan, stricken by the worst fiscal health among major developed countries, is again delaying its financial repairs, with a record high initial budget for the ninth consecutive year.

The budget surpassed 100 trillion yen for the third straight year. It may be increased further if Japanese Prime Minister Yoshihide Suga chooses to form supplementary budgets in an effort to curb the COVID-19 pandemic.

In fiscal 2020, the government spending amounted to 175.69 trillion yen, which was expanded from the initial 102.66 trillion yen.

The largest part of the budget in recent years has been allocated to financing social security services, including health care and pensions, in order to support the country’s rapidly aging population. The social security services budget for fiscal 2021 reached a record high of 35.84 trillion yen.

For the upcoming fiscal year, the Japanese government predicted that a rise in social security spending will stand at about 350 billion yen, revised down from the earlier estimate of about 480 billion yen. To cut the spending estimation, the Japanese government has lowered national health insurance outlays by cutting drug prices among other measures.

The country’s defense budget hit a record high of 5.34 trillion yen for the seventh consecutive year as Japan attempts to increase its capabilities in new fields such as cyberspace and outer space.

Spending on national security includes 33.5 billion yen for the development of standoff missiles which are able to attack enemy vessels from outside the firing range of ships.

Among the policy spending, 5 trillion yen is earmarked for reserve funds to support the health care system and economy.

So far, the Japanese government has used the virus reserve funds to financially assist restaurants and bars that have complied with requests to close early to curb the COVID-19 pandemic.

The reserve funds have also been allocated to hospitals that dedicate beds to COVID-19 patients. Meanwhile, a domestic travel subsidy program aimed at supporting the tourism industry also required funding.

To finance the budget for fiscal 2021, new bond issuances will amount to 43.60 trillion yen.

With tax revenues expected to plunge sharply due to the COVID-19 impact, Japan’s debt dependency ratio will rise to 40.9 percent compared to the previous year’s 31.7 percent.

At the end of fiscal 2019, the balance of state and local government debt in Japan surpassed 1,100 trillion yen, or well over 200 percent of gross domestic product. Enditem

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