The country’s ageing population along with emerging regional threats are pushing the country’s initial budget requests to a record high of $918 billion.
On Tuesday, Japanese Finance Minister Taro Aso stated, Japan’s initial budget request for the financial year 2019-2020 is likely to touch a record high of $918 billion (102 trillion yen).
Japan has an ageing population and faces challenges from its neighbors – North Korea and China.
As per a statement from the country’s finance ministry, it was in the process of finalizing the figures for the next fiscal year starting in April. A boost in planned welfare spending and requests from the defense ministry were pushing Japan’s expected overall expenses.
“An expected increase in welfare spending is a big factor behind next fiscal year’s budget request,” said Aso. “We have to figure out how to accommodate the defense ministry. There are also items we need to include related to the next sales tax hike.”
Although it is possible that the finance ministry cuts the final size of the next fiscal year’s budget to below initial requests, however given its debt burden, which is more than twice its annual gross domestic product, it is possible but highly unlikely.
According to the Organisation for Economic Cooperation and Development, the debt carried by the United States is around 125% of its GDP.
The country’s ageing population has placed an insistent upward pressure on its healthcare and welfare spending. While the government has taken measures to somewhat control this expenditures, but given the rise of the average age in the country, the spending cuts have not stopped the overall increase in welfare outlays.
Adding to this equation is the country’s defense. Japan’s Ministry of Defense has requested 5.3 trillion yen for 2019-2020, which marks a 2.1% increase from the current fiscal year. The hike in defense expenditure is aimed at upgrading its defense systems designed to shoot down North Korean ballistic missiles.
Once it is approved, the budged for the next fiscal year, will mark the seventh straight year of a hike in the country’s defense budget. Japanese Prime Minister Shinzo Abe has to protect Japan’s interest against growing Chinese aggression and a belligerent North Korea.
Abe plans on raising the nationwide sales tax to 10% in October 2019, up from its current 8%. In order to soften the blow from this tax hike, the government plans on multiple stimulus measures.