Japan's New Budget Has Country Issuing Debt Worth More Than Tax Receipts For Second Year In A Row

Japan phone girl

Japan released the details of their new budget today, and it’s light on cuts, heavy on new debt.

The headline number sees $1.11 trillion in spending for the country, according to WSJ.com. But what’s most worrying is that the country will be funding that budget with more bonds than tax receipts.

¥44.3 trillion ($534 billion) in new bonds will fund the budget, while only ¥40.9 trillion ($493 billion) in tax receipts will go towards spending.

While this is in line with expectations, according to Nomura, it is the second year running that Japan has issued more debt to fund its budget than it has taken in through taxes.

While there are cuts, they are meek and, according to Nomura, will only hit GDP by 0.1%.

From Nomura (emphasis ours):

However, the fiscal position remains uncertain in that the government is relying on temporary, rather than permanent, sources of revenue in the form of some ¥7trn of “buried treasure” (eg, surpluses on special accounts). Although the government’s basic budget policies for FY11, which were approved by the cabinet on 16 December, aimed to “focus on economic growth, fiscal consolidation, and social security reform,” the radical reforms needed to achieve this have been postponed until FY12 and beyond.

So, much like the rest of the world, Japan is kicking the can down the road.

Check out Niall Ferguson’s guide to sovereign debt crises >

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