Japan keeps fiscal tap wide open on budget spending requests to fight pandemic

Japan's budget for next fiscal year won't set a spending cap on requests aimed at fighting the Covid-19 pandemic, the finance minister said, suggesting the heavily indebted government would ramp up efforts to revive the coronavirus-battered economy.

The government would ask ministries to keep requests for other spending in line with the current fiscal year's initial budget totalling a record high of 102.7 trillion yen, Finance Minister Taro Aso said at a cabinet meeting.

It would then set aside an unspecified amount of budget requests to respond to "urgently needed expenses" to battle the fallout from the coronavirus.

Japan's fiscal year runs through April to next March.

The budget ceiling is usually set around mid-year by the Ministry of Finance (MOF) to keep a tab on spending requests from ministries for next year's budget to be compiled in December.

"Response to the novel coronavirus remains as urgent task," Aso was quoted as telling a cabinet meeting. "On the other hand, there's a limit to foresee how to respond with budget spending."

The pandemic has taken a heavy toll on the world's third-largest economy, which is in the grip of its worst postwar recession.

Prime Minister Shinzo Abe's government has rolled out a combined stimulus spending worth $2.2 trillion, which has boosted the size of annual budget spending to 160 trillion yen with new debt issuance totalling 90 trillion yen.

The virus stimulus spending came on top of bulging welfare costs to support the ageing society, which Aso said would be taken into consideration during budget compilation by the year end.

The finance ministry will examine the requests and finalise the size of spending in December when it drafts next year's budget. The deadline for budget requests was delayed by one month to end-September due to uncertainty caused by the coronavirus.