Japan’s parliament passed a record 92.3 trillion yen ($1 trillion) budget on Wednesday for the next fiscal year, seeking to underpin a fragile recovery in the world’s No. 2 economy.
It was the first budget for Prime Minister Yukio Hatoyama, who came to power in September 2009 after a historic electoral victory.
The record budget reflected Mr. Hatoyama’s promise to cut wasteful spending on public works and boost funding for social welfare. The budget - for the fiscal year beginning April - was enacted after the upper house of parliament passed it, parliament spokesman Yoshinori Taoka, said.
But it has raised concern over Japan’s already tattered finances as the government will issue a record 44 trillion yen in bonds to fund the budget.
Japan shoulders the biggest public debt among industrialized nations. Its debt stood at 218.6 percent of its gross domestic product in 2009, according to the International Monetary Fund.
Japan’s economy emerged last year from its worst recession since World War II but remains threatened by prolonged deflation, weak domestic demand, and a strong yen, which hurts exports.
Amid a fragile recovery, Japan expects tax revenues in the next fiscal year to fall 18.9 percent from the initial budget of the current fiscal year to 37.4 trillion yen, a finance ministry official said.
Under the budget, spending on social welfare, which includes expenditures of monthly child allowances - one of Mr. Hatoyama’s key pledges - will jump 10 percent from the 2009 initial budget to 27.3 trillion yen, the ministry official said.
In April, the government will start giving families 13,000 yen a month per child to help ease child—rearing costs and encourage women to have more babies.
Japan has the lowest percentage of children among 31 major countries, trailing Germany and Italy, according to a government report. In contrast, the nation’s elderly population is swelling.
The budget shows spending on public works projects will drop a record 18.3 percent to 5.8 trillion yen - the lowest level in 32 years.