Japan's Diet on Wednesday enacted a record 101.46-trillion-yen (920 billion U.S. dollars) budget for fiscal 2019 to address the nation's ballooning social security costs, stimulate the economy and provide a buffer against the likely fallout from a consumption tax hike this year.
The budged passed the more powerful lower house of parliament at the beginning of March and was approved in the upper caucus by the ruling coalition led by Prime Minister Shinzo Abe's Liberal Democratic Party (LDP).
The new record figure marks the first time without factoring in previous supplementary budgets that Japan's general account budget has surpassed the 100 trillion yen (904 billion U.S. dollars) mark.
To cushion against the possible fallout from a consumption tax hike from 8 percent to 10 percent in October this year, the budget's stimulus component has been crafted to underpin domestic demand.
The government increased consumption tax from 5 percent to 8 percent in 2014 and effectively plunged the economy into recession.
Comprising the budget for the year starting April 1 was a 2.03-trillion-yen (18.35 billion U.S. dollars) stimulus package to support domestic demand, which includes mechanisms to lower costs for consumers making cashless payments and systems to support low income and families with young children.
The stimulus package has also been crafted with natural disasters in mind. In particular, allocations have been made to fund preventative infrastructure projects to lessen the fiscal costs related to restoration and reconstruction when natural disasters occur.
As Japan continues to grapple with a demographic crisis as the population is simultaneously aging and shrinking, owing to longer life expectancy and declining birthrates, the majority of the budget, 34.06 trillion yen (307.93 billion U.S. dollars), has been allocated for health care and pension provisions.
Japan's defense spending, meanwhile, which has charted an upward trajectory of late, comprised a record 5.26 trillion yen (47.57 billion U.S. dollars), with the purchase of the Aegis Ashore missile defense system and six F-35A stealth fighters, ensuring spending was markedly higher than the previous year.
The draft budget was provisionally approved by Abe's cabinet late last year. However, a protracted scandal, dating back at least 15 years involving the labor ministry routinely publishing jobs and wages data based on faulty collection methods, led to the budget having to be significantly adjusted.
With concerns over the authenticity of labor-related data released from the ministry and the real efficacy of the prime minister's "Abenomics" economic policy, the government was forced to add 650 million yen (5.87 million U.S. dollars) to the budget to cover the underpayment of benefits to more than 20 million people as a result of the labor ministry's scandal.
As the Japanese government's spending continues to rise, with budgets increasing and logging record highs for the past seven years, moves to consolidate the nation's dire fiscal health are far from improving.
Still mired in deflationary pressure and far from the Bank of Japan's lofty 2 percent inflation target, and exacerbated by constantly rising social security costs and defense spending, Japan's fiscal health remains one of the worst in the industrialized world, with public debt standing at more than double the size of gross domestic product.
