Japan's parliament has approved a massive budget of 112.57 trillion yen ($744 billion) for fiscal 2024, starting in April. This budget is the second-largest in Japan's history and aims to address pressing challenges such as security threats, demographic shifts, inflation, and earthquake recovery.
A significant portion of the budget, 7.95 trillion yen, is allocated to defense spending, reflecting Japan's concerns about threats from China and North Korea. The budget also includes 1 trillion yen in emergency funds for earthquake-hit areas, following a deadly quake in central Japan on New Year's Day.
Despite the government's efforts to reduce spending to pre-pandemic levels, it faces challenges due to increased defense and child-related expenditures. The aging population is also driving up social security costs, which account for a third of the general-account budget.
The budget includes measures to support households struggling with inflation, such as expanding child allowances and ensuring pay hikes for workers. It also prioritizes investment in semiconductors, artificial intelligence, and green transformation to boost economic growth.
Approximately 35.45 trillion yen of the budget will be funded through Japanese government bonds. The government anticipates a benchmark yield of 1.9 percent on 10-year bonds for fiscal 2024, up from 1.0 percent the previous year. The budget was finalized before the Bank of Japan's recent interest rate hike, which could potentially impact debt-servicing costs.