Japan's budget requests hit record $1.35 trillion

TOKYO • Japan's ministries have asked for a record 105.4071 trillion yen (S$1.35 trillion) in initial budget for the next fiscal year, the Finance Ministry said, as Prime Minister Yoshihide Suga's new government juggles the need to rein in the pandemic and revive the economy.

The general account spending requests for the fiscal year that begins next April exceeds the previous high of 105 trillion yen sought for the current year.

The amount received a boost from demand related to urgent steps to contain the virus spread and ease the pain from the economic fallout, which has triggered Japan's deepest recession on record.

State Minister of Finance Wataru Ito told reporters yesterday: "We remain committed to achieving both economic revival and fiscal reform, and we'll overcome the coronavirus crisis to pass the future on to the next generation."

The first budget under Mr Suga underscored a struggle for the heavily indebted government to curb snowballing debt that is more than twice the size of Japan's US$5 trillion (S$6.8 trillion) economy.

Many submitted requests did not specify the amount of spending, leaving room to increase the overall figure as the Finance Ministry reviews the requests and finalises the amount in late December.

Highlighting the bulging costs of supporting an ageing population and financing debt, budget requests for social security and debt servicing came to 32.9 trillion yen and 25.5 trillion yen respectively, or more than half the overall budget.

Virus uncertainty kept the Finance Ministry from setting a ceiling on overall budget requests, making it difficult to curb spending.

Two extra stimulus budgets compiled for this fiscal year to tackle Covid-19 will boost overall government spending to about 160 trillion yen, or 1.6 times the initial budget.

This comes as companies such as Japan Airlines (JAL) continue to plan for new revenue streams, with its president Yuji Akasaka noting yesterday at a media briefing that business travel could shrink even further post-pandemic.

Mr Akasaka said that is the reason why the airline wants to create a low-cost carrier network with three of its discount carriers - to tap leisure travel that, unlike business travel, could rebound as the coronavirus wanes.

"Aviation won't return to what it was before and business travel demand could even shrink further. One of our targets is tourism."

JAL's three low-cost regional carriers include Jetstar, which it operates with Qantas Airlines, Spring Airlines Japan, a joint venture with China's Spring Airlines, and its wholly owned Zipair unit.

Mr Akasaka did not say whether Japan would seek to formally merge their operations through acquisitions.

To survive the downturn in demand, which JAL expects to last until at least 2024 on international routes, the carrier would look to boost revenue from non-airline businesses such as drone parcel deliveries, said Mr Akasaka.

REUTERS