Japan Approves Record Budget of 115.54 Trillion Yen for Fiscal Year 2025

Forex - In Japan, the government has raised concerns about the country's fiscal health by approving a record budget draft of 115.54 trillion yen ($730 billion) for the fiscal year 2025, as social security and national defense spending continue to increase. Prime Minister Shigeru Ishiba appears cautious in pushing his policies following a shocking defeat in the October general elections, which led to increased influence for opposition parties in a hung parliament, while expressing hope that the spending plan would help support an economy trapped by high prices. The general account budget for the fiscal year starting next April exceeds the previous record of 114.38 trillion yen set for the fiscal year 2023.

The draft will be submitted to the Diet for discussion in the ordinary session starting next month. A record level of 78.44 trillion yen in tax revenue is expected for the fiscal year 2025, largely due to strong corporate earnings, while the government plans to issue new bonds worth 28.65 trillion yen to help finance the budget. As Ishiba struggles to restore the soundness of the state finances, which among major developed countries has been rated the worst, the initial bond issuance falls below 30 trillion yen for the first time in 17 years. However, a quarter of total spending will be covered by new bond issuance, emphasizing the government's continued reliance on debt.

Approximately one-third of the budget, or a record amount of 38.28 trillion yen, will be used to address rising social security costs as Japan grapples with a rapidly aging population and declining birth rates while trying to increase childcare support. Amid regional threats posed by China's rapid military buildup and North Korea's growing ties with Russia, the country's defense spending has exceeded 8 trillion yen for the first time, reaching 8.70 trillion yen. The defense budget, which indicates a consecutive 13-year increase, includes expenditures for the serial production of long-range missiles with standoff defense capabilities or targeting adversaries beyond their striking ranges.