Japan approved its biggest ever budget today, as an improving economy and a sales tax hike in made room for more defence spending and the first step towards achieving a balanced budget.
Prime Minister Shinzo Abe’s cabinet rubber-stamped a plan that will see the government spend 95.88 trillion yen ($922 billion) in the year from April 2014, up from 92.61 trillion yen the previous year.
The figure is the largest in Japan’s history due to changes in accounting rules and a sales tax hike, which will rise from five per cent to eight on April 1.
The lion’s share of the extra revenue is ear-marked for spending on snow-balling medical fees and other social welfare costs.
The projected primary balance deficit is expected to shrink by 5.2 trillion yen to 18.0 trillion. That means Japan’s national debt will continue to rise, albeit at a slower pace.
The government’s official policy is that Japan’s primary balance should be in surplus by 2020, although most analysts expect that target to be missed.
In line with defence policies announced last week that are intended to shore up the way Japan protects its remote islands at a time of rising tensions with China, military spending will increase for the second consecutive year.
Nikkei above 16,000 for first time in 6 years
Tokyo: Japan’s Nikkei share average eked out modest gains on Tuesday, retreating from an early rally to above 16,000 for the first time in six years as investors took profits, though it is still on track for its best annual rise since 1972.
The Nikkei finished up 0.1 per cent at 15,889.33, posting its highest closing level in six years for the third session in a row. Earlier, it hit an intraday day high of 16,029.65, its best level since December 2007.