Japan Revises $770 Billion Budget in Rare Move

Japan Revises $770 Billion Budget in Rare Move

Budget Revision Secured Through Opposition Support

Japanese Prime Minister Shigeru Ishiba’s party and its coalition partner have reached an agreement with a key opposition party to revise the $770-billion annual budget bill. This rare compromise ensures the budget passes before the new fiscal year begins in April.

Impact on Bond Market Stability

The agreement clears the way for parliament’s lower house to pass the budget, alleviating concerns in the bond market, which has seen volatility due to rising yields on Japanese government bonds (JGBs).

Cross-Party Agreement on Key Policy Changes

Following discussions, the opposition Japan Innovation Party (JIP) agreed to support the revised budget after securing commitments for increased household subsidies aimed at ensuring free education. This marks the first time since 1996 that the government has been compelled to alter its initial budget allocation.

Weakened Position of Ruling Coalition

The revision highlights the declining influence of Ishiba’s Liberal Democratic Party and its coalition partner, Komeito, after losing their parliamentary majority in the October elections.

Budget Details and Financial Impact

The government initially compiled a record 115.5 trillion yen ($772.11 billion) budget for the next fiscal year while maintaining new bond issuance at a 17-year low, benefiting from record tax revenue. The upcoming revision, focused on education subsidies, is expected to add slightly over 100 billion yen ($668 million) in spending without significantly altering the planned new bond issuance of 28.6 trillion yen ($191.19 billion).

Additional Opposition Demands

The ruling coalition is also in talks with the Democratic Party for the People, which seeks to raise the threshold for tax-free income. These discussions suggest potential further adjustments to the fiscal plan.

Growing Fiscal Expansion Pressure

With an upper house election approaching in July, analysts anticipate increased government spending efforts to attract voter support. Japan’s public debt remains the highest among industrialized nations, exceeding twice the size of its economy. While current fiscal policies limit new bond issuance, growing spending pressures could challenge long-term debt sustainability.

“Japan Revises $770 Billion Budget in Rare Move” “Japan Revises $770 Billion Budget in Rare Move”