Japan Passes Budget Just a Day Before New Fiscal Year Begins #JapanFinance

(Bloomberg) — Japan’s parliament passed an initial budget after multiple revisions, easing some of the pressure on Prime Minister Shigeru Ishiba as he faces a host of domestic and diplomatic challenges.

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Parliament approved the ¥115.2 trillion ($772 billion) budget in a plenary session on Monday, finalizing the bill just one day before the start of the new fiscal year. Originally approved by the Cabinet late last year, the budget underwent several modifications in both the lower and upper houses. It’s the first time in history that the budget was revised by the upper chamber and sent back to its lower house counterpart for an additional sign-off.

Ishiba has been forced to negotiate with smaller opposition parties to pass the budget, at times conceding ground to their requests to secure enough seats to make sure it is not voted down.

The prolonged budget negotiations highlight the difficult position Ishiba’s minority government is in. His administration has been on shaky ground since the Liberal Democratic Party’s poor performance in last October’s election, which came shortly after he took office. With another election approaching this summer, Ishiba has been working to shore up his support, but a mountain of domestic and international challenges continue to complicate his efforts.

“We will do our utmost to implement the approved budget from April 1, ensuring that the lives of the people are secure and stable, the prosperity of the people is enhanced with wage gains that outpace inflation, and the independence and peace of Japan are firmly established,” Ishiba told reporters after the budget approval.

The latest adjustment stems from Ishiba’s decision to defer raising the cap on high-cost medical expenses, which was initially set for August. The premier flip-flopped his stance on the policy after facing strong criticism from both ruling and opposition parties, who argued it would place a significant burden on patients undergoing long-term treatment.

Although the deferral necessitates an additional ¥10.5 billion, Ishiba managed to keep the overall budget unchanged by offsetting the increase with a reduction in reserve funds. Still, at over ¥115 trillion, the budget remains at a record high, adding strain to the country’s already tight finances. The size of Japan’s public debt will be 232.7% of gross domestic product this year, according to the International Monetary Fund’s report last month.