TOKYO: Japan unveiled on Friday (Dec 23) a record 114.4 trillion yen (US$863 billion) budget for the next fiscal year from April, pushed up by increased military spending and higher social security costs for a fast-ageing population.
The budget - endorsed by Prime Minister Fumio Kishida's cabinet on Friday along with a bond issuance plan - features record military and welfare spending for a country saddled with an ageing population and as it confronts regional security issues from an ever-assertive China and an unpredictable North Korea.
To fund defence spending for military facilities, warships and other vessels, the government decided to use construction bonds worth 434.3 billion yen, to be issued in fiscal 2023, in an unprecedented move.
The budget got a boost from Kishida's controversial plan to double Japan' defence spending to 2 per cent of GDP by 2027, straining Japan's already tattered finances under the weight of public debt at 2.5 times the size of its economy.
In a brighter sign for the economy, the budget draft expected Japan to rake in a record tax revenue worth 69.44 trillion yen, reflecting improving corporate profits and 69.44 trillion yen to lower new bond issuance to 35.62 trillion yen.
The budget assumed next fiscal year's exchange rate at 137 yen to the dollar, the weakest since 2010, in calculating fiscal 2023 budget spending for defence and diplomacy, the officials said.
INCREASING DEFENCE BUDGET
Japan on Friday said it will hike defence spending by more than a quarter next year including US$1.6 billion to buy US-made Tomahawk cruise missiles that will be part of its biggest military build-up since World War II.
The 26.3 per cent increase to a record 6.82 trillion yen for the year starting Apr 1 will allow Japan to more than triple spending on munitions it wants to deter regional rivals China and North Korea as Russia's attack on Ukraine spurs regional tensions.
The budget, which lawmakers will approve before April, allocates 897 billion yen for weapons development, more than in the previous four years combined. Japan will use almost half of that to develop new longer-range missiles that along with Raytheon Technologies', Tomahawks will give it the ability to strike targets more than 1,000km away, including in China.
Tokyo plans to begin deploying those new weapons in around three years, a Ministry of Defence official said at a briefing.
Japan, which relinquished its right to wage war after its defeat in World War II, plans to double defence outlays to 2 per cent of gross domestic product within five years. That will make it the world's third-biggest military spender after the United States and China, based on current levels.
That unprecedented spending reflects Japan's concern that China could attack neighbouring Taiwan, and in doing so threaten Japanese islands and put a potential stranglehold on sea lanes that supply Middle East oil.
To help it sustain any prolonged conflict Japan said it will double outlays on maintenance and spare parts next year. It will also increase spending on drones, cyber warfare capabilities, ballistic missile defences, reconnaissance and communications satellites, warships, and transport aircraft.
To reinforce its air fighting capability, it also plans to buy 16 Lockheed Martin Corp F-35 stealth fighters for 250 billion yen. Half of them will be Vertical Take Off and Landing (VTOL) B variants that it will deploy on two converted aircraft carriers.
Japan has also earmarked 102 billion yen next year for a joint jet fighter development project with Britain and Italy announced this month, that aims to put an advanced aircraft into operation by 2035.
Prime Minister Fumio Kishida has said he plans to raise taxes to pay for his military spending surge but has yet to provide a detailed plan of how Japan will fund the build-up.