Japan had a larger-than-estimated surplus of 3.48 trillion yen ($25 billion) in its special account for forex funds in fiscal 2022, helped by a weak yen that boosted earnings from assets such as U.S. Treasurys, the Finance Ministry said Monday.
The government is yet to decide what to do with the surplus, around 641 billion yen more than the government's initial estimate. It could be used to cover an expected sharp increase in defense spending, which would prompt calls for plans to increase taxes to be delayed.
The special account is destined for purposes such as currency interventions and the government holds various assets including U.S. Treasurys.
Yields have risen amid aggressive interest rate hikes by major central banks such as the U.S. Federal Reserve, meaning higher interest revenues for Japan.
The government estimated a special account surplus of 2.84 trillion yen for fiscal 2022 ended March, of which around 1.9 trillion yen was to be reallocated for defense spending.
Japanese Prime Minister Fumio Kishida plans to boost Japan's defense budget over the five years to fiscal 2027, spending a combined 43 trillion yen to address security threats posed by neighboring China, North Korea and Russia.
To fund the increase, he has said the government will first carry out spending reforms and tap surplus money before raising taxes.
The government initially planned to raise taxes in fiscal 2024 or later, but the exact timing has yet to be determined. Kishida has faced growing calls from lawmakers in his ruling Liberal Democratic Party for a delay, strengthening the view that the timing will be pushed back.
Japan also had a surplus of 2.63 trillion yen in the general account of its fiscal 2022 budget, up around 600 billion yen from the recent average, which could also be used to boost defense spending.