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Gov't budget requests for FY 2019 hit record high

TOKYO (Kyodo) -- Budget requests by Japan's government ministries and agencies for fiscal 2019 reached a record-high 102.5 trillion yen ($923 billion) amid snowballing social security costs and increasing defense spending, government officials said Friday.

That figure suggests that the initial general account budget for the year beginning next April could top 100 trillion yen for the first time, making it all the more difficult for the government to achieve fiscal consolidation.

Prime Minister Shinzo Abe's administration is also preparing an additional fiscal stimulus package aimed at underpinning domestic demand after a planned consumption tax hike in October 2019.

Officials at the Finance Ministry will evaluate each request, trimming expenditures they deem unnecessary to draw up a draft budget for Cabinet approval by year-end. The draft will then be submitted to the Diet and enacted in March.

The initial state budget for the current fiscal year came to a record 97.71 trillion yen after the ministry reviewed requests totaling 100.96 trillion yen.

For Japan, restoring its fiscal health -- the worst among advanced economies -- is a paradoxical issue as it faces swelling social security costs to care for the country's fast-aging population.

In June, the Abe administration effectively removed a cap on increases in such spending, which includes pensions and medical coverage and accounts for a third of government outlays.

Political factors are also expected to come into play, with Abe's Liberal Democratic Party likely to shun unpopular austerity measures ahead of House of Councillors election next summer.

The Ministry of Health, Labor and Welfare asked for a record 31.90 trillion yen, up 2.5 percent from the fiscal 2018 initial budget. Social security spending, including that by other parts of the government, is set to grow by around 600 billion yen to more than 32 trillion yen.

The Defense Ministry sought 5.30 trillion yen, up 2.1 percent and also a record high, including 235.2 billion yen to purchase the land-based Aegis Ashore missile defense system from the United States, a measure aimed at countering missile threat from North Korea.

The Justice Ministry proposed a budget of 801.9 trillion yen, an increase of 2.0 percent, partly to fund the creation of a new immigration agency as the country prepares to open its doors to more foreign workers.

The Ministry of Land, Infrastructure, Transport and Tourism requested 6.91 trillion yen, up 19 percent. Public works projects accounted for 6.17 trillion yen of the total, with a particular focus on preventing floods and landslides after torrential rains in western Japan claimed more than 220 lives in July.

The Foreign Ministry asked for 810.1 billion yen, up 16 percent, to cover the cost of hosting the Group of 20 summit and ministerial meetings in the country and receiving foreign dignitaries for a ceremony marking Crown Prince Naruhito's accession to emperor following the abdication of Emperor Akihiro.

The Finance Ministry estimates that 24.59 trillion yen will be needed for debt-servicing costs, up 5.5 percent amid a recent rise in long-term yields.

Aside from the general account budget, the government also requested 1.87 trillion yen in a special account budget for ongoing recovery efforts from the 2011 earthquake and tsunami, down 20.7 percent.

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