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Japan to rely on debt for nearly 80% of $200bn stimulus package

THE NIKKEI via scoutAsia

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November 7, 2022 1 min read
Japan to rely on debt for nearly 80% of $200bn stimulus package

The bulk of Japan's proposed 29 trillion yen ($198 billion) supplementary budget to cushion the blow of inflation will be paid for through new borrowing.

The spending plan, which the cabinet aims to approve Tuesday, includes the equivalent of tens of billions of dollars in subsidies to reduce energy costs for households and businesses, along with funding for child care and technology. The 22.8 trillion yen, or $155 billion, in additional debt -- mostly deficit-covering bonds -- will add to one of the heaviest debt loads among major economies.

The new bond issues will bring the total for this fiscal year's budgets to 62 trillion yen, including the first supplementary budget passed in May. That is the second-highest to date behind fiscal 2020, when the government borrowed over 100 trillion yen as the pandemic took hold. Part of the remaining funding will come from an expected 3.1 trillion yen increase in tax revenue compared with the government's initial estimate for fiscal 2022. Tokyo now sees total tax income breaking last fiscal year's record to reach 68.3 trillion yen, though spending is rising even faster. Another 2.2 trillion yen in unused funds from fiscal 2021 will also be put toward the stimulus package.

Japan's debt to gross domestic product ratio came to 262.5% last year, the highest among major economies, International Monetary Fund estimates show. Government debt per capita topped 10 million yen for the first time at the end of June. Total government borrowing stood at 1,255 trillion yen.

In the U.K., Prime Minister Liz Truss was forced by her party to resign after a "mini-budget" with tens of billions of pounds in unfunded tax cuts sent government bond yields soaring. The reaction to more borrowing has been more muted in Japan, where the Bank of Japan holds most government bonds.

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The English translations provided through this service are the result of automatic and mechanical translation of contents written in Japanese and created by Nikkei or licensed by a third party, by an automatic translation system provided by a third party after certain processing of the contents by Nikkei. Nikkei disclaims all warranties, express or implied, related to the English translations, including any warranty of accuracy, reliability, validity and fitness for a particular purpose. Users shall use this service with the full understanding that it employs an automatic translation system that automatically and mechanically recognizes and analyzes information and outputs the results.