Japan's Abe announces record budget
Japanese Prime Minister Shinzo Abe's cabinet has endorsed a record $US860 billion ($A1.2 trillion) budget for the 2018 financial year, opting to keep the economy on a sustained recovery with aggressive monetary stimulus and putting fiscal reforms on the back burner again.
The general-account budget spending for the next fiscal year starting April will total 97.7 trillion yen ($A1.2 trillion), the biggest amount ever and slightly more than this year's initial plan to spend 97.5 trillion yen, the Ministry of Finance said.
The budget - a record high for the sixth year - got a boost from snowballing welfare spending to respond to a fast-ageing population and a record military outlay amid regional tensions related to North Korea. The demands strain the heaviest public debt burden in the industrialised world.Germany cuts its migration to 200,000
Failure to curb budget spending has cast doubt on Abe's will to back fiscal reform. His administration is counting on growth to boost tax revenue and reduce new borrowing, and on the Bank of Japan's (BOJ) low-rate policy to curb the high cost of servicing mammoth public debt.
"Abe's fiscal reform relies heavily on economic recovery and optimistic tax revenue estimates," said Masaki Kuwahara, senior economist at Nomura Securities. "I don't see a strong determination to resolve public debt from this budget."
Tax revenue for 2018/19 is estimated at 59.1 trillion yen, the highest since fiscal year 1991 during the asset bubble era, assuming the government's rosy projections for real 1.8 per cent and nominal 2.5 per cent growth next fiscal year.Dozens of IS members killed in Afghanistan
Hefty tax revenue allows for reductions in new bond issuance to 33.7 trillion yen, bringing the debt dependency ratio to 34.5 per cent - way higher than other advanced peers.
The government will spend 23.3 trillion yen for debt-servicing - roughly a quarter of the overall budget - even as it keeps assumed interest rates at a record low of 1.1 per cent due to the central bank's negative rate policy.
Finance Minister Taro Aso said this budget should help revive the economy and achieve fiscal reform at the same time, with some spending focused on boosting productivity and investing in human capital.ESM could be used as stabilization fund, Eurogroup head says
While some economists say the budget won't have much impact on near-term growth, others see the spending plan as unsustainable.
"Without a credible fiscal plan, Japan will lose market confidence in the medium to long term," said Hidenori Suezawa, financial market and fiscal analyst at SMBC Nikko Securities.
"It's time to shift towards fiscal consolidation before the BOJ exits stimulus. Japan should be able to assure markets that it can manage debt without relying on the BOJ."Trump in 'excellent health', doctor says