A draft of the 2024-25 budget showed that the Japanese government is intentionally cutting its budget in the next fiscal year (for the first time in 12 years), reflecting the government's will to restore the tattered public finances and revive the economy.
The budget is estimated at 112.1 trillion yen, compared to the initial 114.4 trillion yen budgeted for this fiscal year. Tax revenues are expected to amount to 69.6 trillion yen, which is slightly higher than this year's estimate. The draft budget will be drawn up on Friday and then sent to Parliament for discussion and approval by the beginning of the next financial year, which begins in April.
Meanwhile, sources said the government is likely to raise the estimate of the long-term interest rate used in the government budget to 1.9% for the next fiscal year from 1.1% in the current fiscal year. This will be the first such increase in the last 17 years, reflecting an increase in government bond yields amid expectations that the Central Bank will abandon its ultra-soft monetary policy. The government kept the rate at 1.1% for seven years, until this fiscal year, in line with the Bank of Japan's low interest rate policy. If assumed rates rise, it will increase debt service costs and likely squeeze policy-related spending.