Japan's cabinet on Wednesday approved a record JPY 96.3 trillion (USD 816 billion) draft budget for the next fiscal year starting from April 1. The budget was up JPY 460 billion (USD 4 billion) from the current fiscal year.
Of the total, policy spending, which accounts for over 70 percent of the general account budget, will be JPY 72.89 trillion (USD 618 billion), of which record JPY 31.5 trillion (USD 267 billion) will go to social security expenditures to help the country deal with its rapidly growing population.
Defense expenditures will increase to a record 4.98 trillion (USD 42 billion) amid China's growing maritime assertiveness around the disputed islands in the East and South China seas.
Meanwhile, tax revenue is projected to JPY 54.5 trillion (USD 462 billion), the highest level in 24 years. Thanks to the higher tax revenue, the government plans to cut new bond issuance to JPY 36.9 trillion (USD 312 billion), the lowest level in six years. Japan's public debt exceeds 200 percent of annual gross domestic product (GDP), the heaviest debt burden among major industrialized economies.
"I believe that we have compiled a budget that will help achieve the goals of economic revitalization and restoring fiscal health," Prime Minister Shinzo Abe told reporters, showing confidence that the government will meet its key fiscal rehabilitation target of lowering the primary balance to GDP ratio to half by fiscal 2015 from the fiscal 2010 level.
"We managed to reduce bond issuance by JPY 4.4 trillion from the current fiscal year for the third-biggest year-on-year cut on record," Abe added.
The government plans to submit the draft budget to Parliament later this month. The world's third-largest economy contracted for two quarters in a row since the April sales tax hike, from 5 percent to the current 8 percent.
Abe decided in November to postpone the second sales tax increase to 10 percent, originally set for October 2015, by 18 months until April 2017.