Japan is planning a record budget for next fiscal year to support an economy that fell into recession after Japanese Prime Minister Shinzo Abe’s government increased the sales tax.
Government ministers and the ruling coalition parties approved the ￥96.34 trillion (US$813.41 billion) budget proposal for the 12 months starting April 1 at a meeting in Tokyo yesterday, Japanese Minister of Finance Taro Aso told reporters.
Japan, fighting to rein in the world’s heaviest debt burden, will see tax revenue rise to the highest level in 24 years, while new bond issuance declines to the lowest since 2008. Abe has already boosted public works spending and support for small businesses through a supplementary budget for the current year.
“The budget will continue to grow each year as it gets increasingly difficult to curb social welfare spending due to Japan’s aging population,” Barclays PLC chief Japan economist Kyohei Morita said. “Given the risk that the economy will be hurt by a sudden decline in public works spending in the latter half of 2015, the government might have to draft another extra budget.”
Tax revenue for next fiscal year is projected to rise to ￥54.53 trillion and cover 57 percent of the budget, up from 52 percent. New bond issuance will decline to ￥36.86 trillion, Aso said.
While the sales tax has increased, the government has plans to reduce corporate taxes by 3.29 percentage points over two years.
GDP contracted for two straight quarters after the sales tax was increased 3 percentage points to 8 percent in April. In response, the government deferred another planned bump in the levy and last month assembled a ￥3.5 trillion stimulus package and the supplementary budget.
Real GDP should rebound, growing 1.5 percent next fiscal year, according to estimates released by the Japanese Cabinet Office yesterday. That follows a projected 0.5 percent contraction in the 12 months through March.
Abe’s Cabinet is scheduled to meet tomorrow to formally adopt the budget. The government has yet to release a full breakdown of all planned expenditure.
“The budget deals appropriately with issues Japan faces, including the revitalization of regional economies and the improvement of social welfare,” Aso said. “Coupled with tax revisions for the next year, the budget will revive the economy while consolidating government finances.”
The government will meet its target for halving the ratio of the primary balance deficit to GDP next fiscal year, Aso said. This gauge is calculated by subtracting expenditures excluding interest payments from revenue without bond sales, and is a key measure for the Abe administration as it attempts to control debt.
In a fiscal reform plan released in 2013, the government said it also aimed to achieve a surplus in the primary balance in 2020.
Japan’s debt-to-GDP ratio is projected by the IMF to swell to more than 245 percent next year.
Moody’s Investors Service cut Japan’s credit rating one level to “A1” last month, citing uncertainty over whether Japan could achieve its deficit reduction goals.
“It’s difficult for Abe to cut spending dramatically ahead of local elections,” Takeshi Minami, an economist at Norinchukin Research Institute, said before yesterday’s announcement. “The government seems to be conservative in the main budget. It just drafts extra budgets whenever it’s necessary to boost the economy.”
END TO SPECULATION: The hotel’s management contract has been extended, despite reports that it wanted to end its alliance with Hyatt Hotels over a deal with Riant Capital Singapore-based Hong Leong Hotel Development Ltd (豐隆大飯店股份) yesterday said it has extended a management contract to ensure the continued presence of the Grand Hyatt brand in Taipei, ending rumors that the two sides were parting ways. “We are pleased Hyatt is able to come to terms on the extension of the management contract of Grand Hyatt Taipei,” said Kwek Leng Beng (郭令明), executive chairman of City Developments Ltd (城市發展) and Millennium & Copthorne Hotels Ltd (千禧國敦酒店). Hong Leong Hotel Development is a subsidiary of Millennium, and both fall under the Hong Leong Group (豐隆集團). The Grand Hyatt Taipei (台北君悅大飯店), owned and built by
’WHITE BOX’: The open platform would give local firms access to Cisco’s cloud-based mobile network to develop 5G telecom equipment and tap into the global market The Ministry of Economic Affairs (MOEA) yesterday introduced a new 5G “open lab” in collaboration with US-based information technology and networking giant Cisco Systems Inc to address the rapidly growing “white box” 5G networking equipment market. The open lab will be a platform where Taiwanese manufacturers can access Cisco’s cloud-based mobile network to develop their own 5G telecom equipment, such as small-cell base stations, network switches, modems and Internet of things (IoT) devices, a ministry statement said. The open platform would allow Taiwanese manufacturers to tap into the lucrative 5G telecom equipment market, which was previously monopolized by Nokia Oyj, Ericsson AB
Nintendo Co is raising its target for Switch production to about 25 million units this fiscal year, people familiar with the matter said, as the ongoing COVID-19 pandemic keeps lifting demand and component shortages ease. The Kyoto, Japan-based company, which in April hiked orders to 22 million units by March next year, is asking partners to tack on another few million units, said the people, who did not want to be identified discussing internal goals. Assembly partners plan to work at maximum capacity through December. The new production target suggests that Nintendo is likely to outperform its Switch sales forecast of 19 million
NERVOUS MARKET: With the infection sources still unknown for three COVID-19 cases that had departed Taiwan, investors have become uneasy, an analyst said Local shares yesterday came under heavy downward pressure, falling more than 1 percent as renewed fears over a possible increase in domestic COVID-19 infections hit market sentiment after the nation last week reported a case related to a Belgian national. Selling focused on the bellwether electronics sector, led by contract chipmaker Taiwan Semiconductor Manufacturing Co (TSMC, 台積電), which pushed down the broader market as investors ignored gains posted by tech heavyweights on the US market at the end of last week, dealers said. The TAIEX closed down 151.77 points, or 1.2 percent, at 12,513.03, on turnover of NT$231.43 billion (US$7.84 billion). Foreign