Japan government FY2018 budget request to top 100 trillion yen for fourth year - sources

TOKYO (Reuters) - Annual budget requests from Japan’s government offices will top 100 trillion yen (701.59 billion pounds) for a fourth straight fiscal year, reflecting snowballing welfare spending due to the fast-ageing population, government sources told Reuters.

The requests, to be announced next week, totalled 100.96 trillion yen, slightly below the 101.47 trillion yen requested last year for the fiscal 2017 initial budget, the sources said on condition of anonymity because the plan has not been fixed.

Still, the relatively high spending underscores a challenge for Prime Minister Shinzo Abe, who faces pressure from within his ruling party to boost fiscal spending despite the fact that the economy has staged a sixth straight quarter of expansion.

Some analysts urge Abe to tackle fiscal consolidation while the economy is in good shape given that Japan is saddled with the industrial world’s heaviest debt burden at more than twice the size of its economy.

But Abe’s government prioritises growth over fiscal discipline while taking advantage of the central bank’s negative interest rate policy that brings down borrowing costs.

The spending requests got a boost because the finance ministry did not cap budget requests by ministries and agencies.

The finance ministry will scrutinise the budget requests and trim them towards December when it drafts an annual budget for the next fiscal year that begins in April 2018.

Of the total requests, debt-servicing accounts for 23.82 trillion yen, lower than the prior year’s request as the finance ministry assumes the borrowing rate at a record low of 1.2 percent. Other spending amounts to a record 77.14 trillion yen.

Bulging welfare spending to fund the cost of services for the fast-ageing population has pushed this fiscal year’s annual state budget to 97.45 trillion yen, the biggest amount ever.

Abe faces pressure to spend in other areas such as public works as well as defence to cope with North Korea’s missile and nuclear threats, making it harder to achieve his ambitious goal of bringing a primary budget surplus by March 2021.

Reporting by Takaya Yamaguchi and Tetsushi Kajimoto; Editing by Jacqueline Wong