Japan is planning to compile a supplementary budget worth more than 10 trillion yen ($77 billion) after this summer's House of Councillors election to finance measures aimed at stimulating the economy and mitigating the impact of rising prices, government sources said Friday.
The government is likely to issue more bonds for the envisaged second extra budget for fiscal 2022 starting in April, according to the sources, which would further deteriorate Japan's fiscal health.
The budget to be drafted in the fall is seen as necessary to implement some of Prime Minister Fumio Kishida's key economic policies, which his Cabinet is due to approve next Tuesday.
A government task force earlier this week unveiled a plan to realize a "new form of capitalism," a concept advocated by Kishida for fairer wealth distribution.
The plan has four pillars -- human resources, science, technology and innovation, investment in startup companies, and green and digital technology.
Once the plan, as well as this year's fiscal and economic policy guideline, is approved by the Cabinet, the government will move into the process of crafting specifics of the focus areas.
The Liberal Democratic Party, led by Kishida, and its junior ruling coalition partner Komeito will likely then head into the election campaign by bringing a new economic package under the spotlight and pledging its early implementation. The upper house election is expected to be held on July 10.
The forthcoming extra budget will also be financed by reserve funds for fiscal 2022 and a surplus in tax revenues from fiscal 2021.
The previous fiscal year's tax revenue is seen topping the government's earlier projection of 63.88 trillion yen as it expects to collect more from corporate and other key taxes on the back of an economic recovery from the coronavirus pandemic.
But relying on reserve funds and tax revenues will not be enough to finance the second supplementary budget and the issuance of debt-covering government bonds seems to be unavoidable.
While Japan's fiscal situation is the worst among major developed countries, the total amount of such bonds to finance the initial budget and the first extra budget for fiscal 2022 is already estimated at 39.6 trillion yen.
The government is planning to include an extension of the current subsidy program for oil wholesalers to bring down retail gasoline prices in the envisioned economic package as crude oil costs are expected to remain elevated, according to the sources.
In April, it secured funds to extend the program until September by crafting a 6.2 trillion yen relief package to tackle rising fuel and food prices following Russia's invasion of Ukraine. The package also included cash handouts for child rearing households with low incomes.
On the assumption that the COVID-19 situation continues to ease, the government is also considering coming up with measures to promote tourism for the fresh economic package, the sources said.
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