According to a government draft, Japanese ministries plan to submit a budget that exceeds 110 trillion yen ($698 billion) for the fourth year in a row. The main cause of this increase is the projected increase in interest rates, which will drive up the cost of debt servicing.
Japan has doubled the amount of its economy in public debt, making it the most debt-ridden country among developed nations. The Bank of Japan (BOJ) may raise interest rates from their current near-zero levels, which would result in higher debt management expenses.
The record 114.38 trillion yen sought for the current fiscal year may be surpassed in the budget requests that are due to the Ministry of Finance by the end of August. One important contributing aspect to this possible increase is rising interest rates. By year’s end, the Cabinet is anticipated to adopt the draft budget.
Initiatives to increase wage growth and safeguard citizens from price increases brought on by a declining yen may also have an impact on the budget proposal. The BOJ stated last month that it will be scaling back its massive bond-buying programme. The specific plan will be unveiled during its next policy meeting, which is scheduled for July 30-31.
