Japan's cabinet approves record $730 billion budget for next fiscal year

Japanese Prime Minister Shigeru Ishiba's cabinet on Friday approved a record $730 billion budget for the next fiscal year, while limiting new bond issuance to the lowest in 17 years on the back of record tax revenue. 

The budget for the fiscal year that starts in April is estimated at 115.5 trillion yen ($732.36 billion), up 2.6 per cent from the current year's 112.6 trillion yen, driven by debt-servicing and social security costs. 

But record tax revenue is likely to help reduce new bond issuance to 28.6 trillion yen, the lowest since 2008. 

As a result, the debt dependence ratio will stand at 24.8 per cent, meaning new bond sales account for a quarter of the budget. It represents the first drop below 30 per cent since 1998. 

Japanese Finance Minister Katsunobu Kato said at a news conference on Friday that the government "will continue working to achieve both economic turnaround and fiscal health." He also said the government is sticking with its goal of delivering a primary budget surplus by the next fiscal year, though a detailed estimate would not be released until early 2025. 

However, the budget plan may struggle to get through parliament, as Prime Minister Shigeru Ishiba's minority government needs support from opposition parties to pass legislation. 

A key opposition party is demanding a more aggressive lifting of the income tax threshold in effective tax cuts, potentially hurting tax revenue. 

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