Japan’s budget calls for record high as race for leadership intensifies By Reuters

TOKYO (Reuters) – Japan’s budget requests are likely to hit a record next fiscal year, topping $800 billion, people familiar with the matter said on Wednesday, as the No. 1 economy. growth.

A new leadership race could complicate Tokyo’s efforts to restore fiscal discipline as a vote this month for the new leader of the ruling party, and by extension the next prime minister, risks triggering early parliamentary elections.

The sources declined to be identified because the matter is still private.

The record 117 trillion yen ($804 billion) budget requests come as the Bank of Japan moves away from its decade-long stimulus program.

This means that the government can no longer rely on ultra-low borrowing costs and the central bank to effectively fund debt.

The assumed interest rate would rise to 2.1% for the year starting in April from 1.9% this year, raising debt service costs for interest payments and debt redemptions to 28.9 trillion yen from 27 trillion yen for the current year, according to the finances. ministry.

Government ministries have been allowed to request unspecified amounts of money for measures to expand childcare and mitigate price rises, which would raise budget demands.

Japan, saddled with the industrial world’s largest debt, more than twice the size of its economy, has pledged to generate a primary budget surplus by the next fiscal year.

Fixing tattered public finances has emerged as an oft-mentioned topic in the ruling party’s leadership election scheduled for September 27.

Kono Taro, the digital transformation minister who is in the running, described the current fiscal situation as an “emergency,” saying Japan must regain fiscal discipline.

Another candidate, Takayuki Kobayashi, said he plans to launch a new package to ease the pain of rising prices.

“The economy should take precedence over finance,” he said last month.

Several lawmakers told Reuters there was a possibility that energy subsidies could be extended further to support households.

“With the upcoming lower house election, calls for more spending could increase,” said Saisuke Sakai, senior economist at Mizuho Research and Technologies. Failure to streamline spending would make it difficult to achieve a primary budget surplus, he added.

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