By Leika Kihara and Tetsushi Kajimoto
TOKYO (Reuters) – Japan’s government is expected to fund part of its spending for childcare measures by issuing additional bonds over a period of roughly two years, the Yomiuri newspaper reported, raising concerns about an already high public debt burden.
The plan will be included in the government’s long-term economic platform to be issued in June, the Yomiuri reported on Wednesday, citing several government sources.
Prime Minister Fumio Kishida has announced a plan to double the amount of childcare support over the next three years. On the question of financing the major portion of the spending package, Kishida has ruled out the possibility of sales tax hikes, leaving debt issuance as one of the leading options of funding, at least for now.
“As far as I can see, the government is floating an idea of issuing bridging bonds, which will be redeemed likely through a future increase in taxes,” said Takuya Hoshino, economist at Dai-ichi Life Research Institute.
“The government is foregoing politically unpopular tax hikes, at least for now, when general elections may draw near.”
The latest plan, following another big programme to double national military spending, would strain Japan’s already dire public debt, which is over twice the size of annual economic output.
“The prime minister has stressed the importance of winning people’s understanding, while tackling thoroughly expenditure reform to minimise public burdens,” Chief Cabinet Secretary Hirokazu Matsuno told reporters on Wednesday.
Under the proposed financing scheme the government estimates it needs to raise about 3 trillion yen ($22.21 billion) in funds per year for a childcare policy Kishida has put forward to help reverse the declining birth rate.
The government would expand the size of the funds gradually over the three years from fiscal 2024 and secure the necessary amount by the end of the policy period.
The Yomiuri report did not say how much debt will be issued to fund the spending, while Hoshino estimates the amount would be some 1 trillion yen, or one-third of the funds.
The government earmarked around 5 trillion yen for this fiscal year that began in April to pay for the overall childcare budget programme.
($1 = 135.0500 yen)
(Reporting by Leika Kihara and Tetsushi Kajimoto; Additional reporting by Satoshi Sugiyama; Editing by Tom Hogue and Shri Navaratnam)
