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Japanese finances under a microscope as budget goes before parliament


Japanese finances under a microscope as budget goes before parliament

Photo: Reuters/Thomas White

Japan’s parliament is expected to approve the government’s 2018 budget today, marking six straight years of record budget growth amid regional tensions and questions over debt sustainability.

A rapidly ageing population and a slow-growth economy have forced the government to increase spending on areas such as education, aged care and defence. While central bank efforts have allowed the government to borrow cheaply, Tokyo’s apparent dependence on unsustainable fiscal stimulus has made investors uneasy.

Already worth twice the size of the economy Japan’s $5 trillion economy, public debt levels continue to increase. Indeed, defence spending is set to reach record levels in 2018 amid sustained weapons procurement in the face of dual threats from North Korea and—over the long-term—China.

Despite questions over its sustainability, parliament will approve the 2018 budget today. North Korea’s continued posturing and progressing nuclear program will likely cause increased defence spending over the short-term. Long-term, expect Japan to address its financial situation, accounting for rising social welfare expenditure and debt servicing costs.

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