Japan’s cabinet on Friday approved a record $730 billion budget for the fiscal year starting in April, while limiting new bond issuance to the lowest in 17 years on the back of record tax revenue.
The budget for the fiscal year that starts in April is estimated at 115.5 trillion yen ($732.36 billion), up 2.6% from the current year’s initial amount of 112.6 trillion yen, driven by debt-servicing and social security costs.
But record tax revenue is likely to help reduce new bond issuance to 28.6 trillion yen, the lowest since 2008.
As a result, the debt dependence ratio will stand at 24.8%, meaning new bond sales account for a quarter of the budget. It represents the first drop below 30% since 1998.
The budget plan may struggle to get through parliament, however, as Prime Minister Shigeru Ishiba’s ruling coalition needs support from opposition parties to pass legislation since the loss of its majority in the October election.
A key opposition party is demanding a more aggressive lifting of the income tax threshold in effective tax cuts, potentially hurting tax revenue.