FILE PHOTO: People wearing protective masks make their way amid the coronavirus disease (COVID-19) pandemic at a business district in Tokyo, Japan August 4, 2020. REUTERS/Kim Kyung-Hoon
December 14, 2020
By Takaya Yamaguchi
TOKYO (Reuters) -Japan’s cabinet is set to endorse on Tuesday a third extra budget for the financial year ending in March, with spending of around 19.2 trillion yen ($185 billion) to fund a new stimulus package, a draft document seen by Reuters showed on Monday.
The additional budget comes a week before next fiscal year’s annual budget draft is due to be decided. The two will be rolled out together as a 15-month budget to help the economy recover from a COVID-19-induced slump.
The spending plan will add to the industrial world’s heaviest public debt burden, underscoring policymakers’ struggle to pursue much-needed fiscal reforms while containing the pandemic and reviving the economy.
The Bank of Japan is likely to decide this week to extend measures aimed at easing corporate funding as a resurgence of COVID-19 cases clouds the outlook, sources said – a sign the central bank is keeping step with government efforts to prop up the economy.
Slumping tax revenues and the extra budget spending will raise planned bond issuance by 22.4 trillion yen, pushing up new issuance to above 110 trillion yen for the current fiscal year 2020/21, government sources told Reuters.
Tax revenue is expected to fall 8.4 trillion yen short of initial budget estimates, to around 55.1 trillion yen, as a result of the COVID-19 hit to corporate profits, the draft showed.
Japan’s public debt burden, at twice the size of its economy, is the biggest among advanced nations due to years of heavy stimulus and the snowballing social security costs of supporting a rapidly ageing population.
The world’s third-largest economy rebounded in July-September from a second-quarter slump that was its worst since World War Two, although many analysts expect a third wave of the pandemic to keep any recovery modest.
($1 = 103.8400 yen)
(Reporting by Takaya Yamaguchi; writing by Tetsushi Kajimoto; Editing by Andrew Heavens and Catherine Evans)