Japan's Cabinet on Friday approved a record 36.0 trillion yen ($314 billion) supplementary budget for fiscal 2021 to fund the government's latest economic stimulus package to put the coronavirus pandemic-stricken economy on a steady recovery track.
The first extra budget for the current fiscal year from April entails new government bond issuance worth 22.1 trillion yen. It means most of the supplementary budget will be financed by debt, adding a further blow to the country's fiscal health.
The government also plans to use 6.1 trillion yen that was carried over from the fiscal 2020 budget, as it is preparing for the new economic package worth about 78.9 trillion yen when private funds are included and features a record 55.7 trillion yen fiscal spending.
Japan's new debt issuance for the current fiscal year through March 2022 is now estimated at 65.7 trillion yen.
The figure is smaller than the about 108.6 trillion yen in the previous fiscal year when the government compiled three extra budgets totaling about 73 trillion yen to fight the coronavirus pandemic, but fuels fear of a further deterioration in the nation's fiscal soundness, the worst among major developed nations.
The Cabinet gave the nod to the stimulus package a week ago to weather the prolonged fallout from the pandemic.
"The economic package and the extra budget were compiled based on the view that we should take necessary fiscal measures without hesitation in the midst of the coronavirus pandemic crisis," Finance Minister Shunichi Suzuki told a press conference.
The 36.0 trillion yen budget eclipses the previous largest extra budget of 31.9 trillion yen crafted for the second supplementary budget for fiscal 2020.
Prime Minister Fumio Kishida has said his administration aims to have the latest supplementary budget clear the Diet in an extraordinary parliamentary session to be convened on Dec. 6.
Through the stimulus, Kishida, who took office on Oct. 4 and led the Liberal Democratic Party to victory in the Oct. 31 general election, aims to lead the domestic economy to recover to pre-pandemic levels while trying to meet his goal of redistributing wealth by increasing support for households and firms.
Under the extra budget, 18.6 trillion yen will be used for measures to curb the spread of the virus and ease the economic impact of the pandemic, including financial aid of 2.0 trillion yen for medical institutions to secure more beds for COVID-19 patients and 1.3 trillion yen to further promote the nation's vaccination program.
The 18.6 trillion yen also includes 1.7 trillion yen to increase funds for the government's unemployment insurance system amid growing payments for allowances to furloughed workers.
To boost the pandemic-hit tourism sector, 268.5 billion yen will be allocated to restart the government's "Go To Travel" domestic tourism subsidy program, which was suspended nationwide last December following a spike in new virus cases.
The approval of the extra budget came as Japan has seen significantly lower numbers of new virus cases amid steady progress in the government's vaccine rollout, leading to various restrictions on economic activities being gradually eased.
Suzuki said the policy package was designed to enable Japan to deal with another wave of COVID-19 infections in the future "to some extent, given the situations in some foreign countries" that are facing virus resurgences. The discovery of a new coronavirus variant in South Africa could worsen the pandemic worldwide. On the same day, Japan decided to tighten restrictions on travelers from South Africa and five nearby countries in response to the new variant.
As part of Kishida's signature policy to boost Japan's economic security, 617 billion yen will be set aside to help chip-making companies secure production bases, including some 400 billion yen to be used to aid Taiwan Semiconductor Manufacturing Co. in building a new factory in the southwestern prefecture of Kumamoto.
Among the key measures under the stimulus package is 100,000 yen handouts in cash and vouchers to children aged 18 or younger in households where the primary earner's annual income is less than 9.6 million yen.
Some of the stimulus measures will be financed by the initial budget for fiscal 2022, to be drafted next month, as well as the government's reserve fund for fiscal 2021 to deal with the pandemic.
To partially fund the handouts for children, the Cabinet approved Friday morning the use of 731.1 billion yen from the reserve fund.