- Kyohei Morita, chief Japan economist at Barclays Plc
The Japanese government plans a record budget for the next fiscal year to prop up the world's third biggest economy, which slid into recession after Prime Minister Shinzo Abe lifted the sales tax in April 2014. Ministers and the ruling coalition parties approved the 96.34 trillion yen ($814 billion) budget proposal for the 12 months starting April 1. Abe's Cabinet is due to meet on 14 January to formally adopt the budget. Tax revenue for next fiscal year is expected to increase to 54.53 trillion yen and finance 57% of the budget, up from 52%. New bond issuance will decline to 36.86 trillion yen, Prime Minister Taro Aso said. It is the third annual budget since Abe came to power in 2012. The budget for the coming year follows an extra budget of 3.1 trillion yen for the current fiscal year, approved last week. With the budget deficit estimated at about 3% of GDP for the 2015-2016 fiscal year, Abe could fulfil the government's pledge to halve the debt ratio from 2010-2011 levels. However, the ultimate goal of balancing the budget by 2020-2021 looks too ambitious. The International Monetary Fund forecasts Japan's debt-to-GDP ratio to swell to more than 245% in 2015.
Japan's GDP is expected to rebound, growing 1.5% next fiscal year, according to estimates by the Cabinet Office, after the slowdown for two consecutive quarters and following a projected 0.5% contraction in the 12 months through March.
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