Japan’s budget requests reach ¥101 trillion for fiscal 2018, making sustainability a challenge


General-account budget requests by government ministries and agencies totaled around ¥101 trillion ($913 billion) for fiscal 2018 amid ballooning social security expenses and record-high defense spending, government officials said Thursday.

The budgetary requests submitted to the Finance Ministry topped the ¥100 trillion mark for the fourth straight year, making the task of achieving fiscal sustainability all the more difficult.

Prime Minister Shinzo Abe, struggling to bolster flagging support for his Cabinet, has vowed to prioritize human resource development and labor reform at a time when Japan faces a severe labor shortage.

For fiscal 2018, which starts in April, the government plans to set aside nearly ¥4 trillion for priority projects to support the world’s third-largest economy.

The Finance Ministry will review each request and trim the total amount toward year-end to compile the state budget for the next fiscal year.

The initial budget for the current fiscal year through March came to a record ¥97.45 trillion after the ministry reviewed requests totaling ¥101.47 trillion last year.

Fiscal balance is an elusive goal for Japan as social security costs such as pensions and medical expenses have been on an upward trend along with the country’s rapidly aging population.

In addition, a decision has yet to be made on how to secure funding to realize Abe’s policy goal of making preschool education and child day care services free.

Spending on social security, accounting for roughly a third of the country’s total expenditure, is estimated to increase ¥630 billion from the current fiscal year.

The Ministry of Health, Labor and Welfare requested a record ¥31.43 trillion, up 2.4 percent from the fiscal 2017 budget.

Part of the funds will be used to improve working conditions for nonregular workers that comprise over a third of the working population in Japan and enable children to go to nursery schools without getting wait-listed.

The Defense Ministry sought a record ¥5.26 trillion, up 2.5 percent, to address missile threats from North Korea and defend remote islands in southwestern Japan amid China’s rising maritime assertiveness.

North Korea’s launch this week of a ballistic missile over Japan into the Pacific Ocean ratcheted up tensions that had already been running high in the region.

To enhance defense capabilities, the Defense Ministry is aiming to seek funds to introduce a new missile shield system, possibly the land-based Aegis Ashore, though details such as the actual amount need to be worked out.

The Ministry of Land, Infrastructure, Transport and Tourism is calling for ¥6.69 trillion, up 16 percent, including ¥6.02 trillion for public works projects. It aims to prepare infrastructure ahead of the 2020 Tokyo Olympics and Paralympics, take disaster prevention measures and boost tourism.

The Foreign Ministry’s request for ¥767.5 billion marked an 11 percent increase. The amount includes ¥489.7 billion in official development assistance, up 13 percent, to help improve maritime security under its free and open Indo-Pacific strategy.

The Ministry of Agriculture, Forestry and Fisheries requested ¥2.65 trillion, up 15 percent, including funds to help farmers cover their revenue falls due to natural disasters and other factors.

The Finance Ministry estimates ¥23.82 trillion will be needed for interest payments and debt-servicing costs, down ¥800 billion from the fiscal 2017 budget request.

The estimates assume a record-low interest rate of 1.2 percent on government bonds amid the Bank of Japan’s negative interest rate policy that has sent bond yields lower.

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