Japan’s budget likely to exceed $698b for 4th year in a row

Japanese ministries are expected to request a budget exceeding 110 trillion yen ($698 billion) for the fourth consecutive year in the next fiscal year, according to a government draft viewed by Reuters.

This surge is largely attributed to anticipated interest rate hikes that will increase debt-servicing costs.

Japan’s public debt, the largest among industrialised nations, is twice the size of its economy. The Bank of Japan (BOJ) is considering raising interest rates from near-zero levels, which could make managing the debt even more costly.

Budget requests, to be submitted to the Ministry of Finance by the end of August, could even surpass the record 114.38 trillion yen sought for the current fiscal year.

Rising interest rates are a key factor driving this potential increase. The draft budget is anticipated to receive approval from the Cabinet by year’s end.

Measures to shield citizens from price hikes caused by a weakening yen and initiatives to promote wage growth could also contribute to a larger budget request.

The BOJ announced plans to begin scaling back its substantial bond-buying programme last month, with a detailed strategy expected to be unveiled at its upcoming policy meeting on July 30-31.

Attribution: Reuters