TOKYO (Reuters) - Japan’s government ministries made budget requests totaling a record 99.3 trillion yen ($994.9 billion) for the fiscal year from next April, the finance ministry said on Wednesday, which will test the government’s ability to cut spending.
Budget requests swelled because the finance ministry requested a record amount for debt-servicing costs. Bulging social welfare spending due to an ageing society also pushed up budget requests.
The amount requested matched what sources told Reuters last week ahead of a submissions deadline on Friday. The finance ministry in recent years has typically trimmed the requested total by several trillion yen when it prepares its draft budget in December.
Prime Minister Shinzo Abe is struggling to balance the need for economic stimulus and the need to rein in the country’s public debt, which is double the size of its GDP - the heaviest such burden among the industrialized nations.
“We will need to thoroughly examine these requests and prioritize our spending,” said Vice Finance Minister Shunichi Yamaguchi.
“If we go against our fiscal discipline framework, this could hurt confidence in Japanese government bonds.”
The government is committed to lowering its primary budget deficit by 4 trillion yen next fiscal year, and this will help insure that the government trims the initial budget requests, Yamaguchi also said.
One of the government’s important fiscal discipline targets is to eliminate its primary budget deficit by fiscal 2020, which excludes debt servicing costs and income from debt sales.
The budget requests compare with 92.6 trillion yen earmarked for this fiscal year.
The process is complicated this year, however, as no ceiling has been set for the budget draft due to a pending sales tax increase, while Abe’s government faces pressure for more spending to stimulate the economy.
The finance ministry requested a record 25.3 trillion yen in debt-servicing costs under the budget to manage the country’s massive outstanding debt, which recently crossed the 1,000 trillion yen mark.
Ministries additionally requested 3.5 trillion yen for a special allocation aimed at promoting growth industries.
Abe is expected to make a final decision on the planned sales tax increase in early October.
If Abe sticks with the plan, this could help improve revenue for the next fiscal year’s budget.
Reporting by Stanley White; Editing by Jacqueline Wong