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Japan: Shinzo Abe’s cabinet has signed off on a record budget for 2015


Shinzo Abe’s cabinet has signed off on a record budget for 2015 that will boost economic increase in Japan’s economy but leaves tough choices on spending for the next.
The in general budget will rise by 0.5 % to Y96.3tn ($814bn) as the ageing people drives up welfare costs, defence spending increases and interest costs rise on the growing public deficit.

High spending will help Abenomics towards its goals of higher inflation and increase but it highlights how fast-growing welfare costs will rapidly absorb the benefits of last year’s consumption tax rise. The higher consumption tax and strong corporate profits because of the weak yen are set to drive revenues to their highest level in 24 years at Y54.5tn — up 9 % on the previous year.

Mr Abe is therefore set to meet his goal of halving Japan’s primary deficit — excluding the cost of interest payments — but with most of the development due to a cyclical upturn, it still leaves a vast structural gap between revenue and spending.
Finance ministry insiders say additional stringent cuts will be needed in coming years to meet a pledge to balance the budget, excluding deficit-service costs, by 2020.

The government says it will produce a long-term fiscal consolidation plan — perhaps involving large reductions in social security spending — by the summer.

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