Japan's Finance Minister Taro Aso said initial budget requests for fiscal 2019 would likely hit a record 102 trillion yen, given Japan's aging population and defense threats from China and North Korea, Reuters reported.
Aso said an increase in welfare spending and a request from the defense ministry to raise its budget to a record 5.3 trillion yen in fiscal 2019 were driving up the costs. Fiscal 2019 starts next April.
Tokyo has implemented measures to cut down on welfare and healthcare spending but the average age in Japan is rising so fast that spending cuts have not stopped the overall increase in welfare outlays, Reuters reported.
Japan's Prime Minister Shinzo Abe has also recently vowed to implement changes in the country's social security system in the next three years to address the country's shrinking population and rising fiscal debt.
The defense ministry, for its part, plans to use the funds for major upgrades of Japan's defense systems in response to China's growing air and sea forces and North Korea's missile program. In August 2017, North Korea fired a missile over Japan that landed in waters north of Hokkaido.
"There are also items we need to include related to the next sales tax hike," Aso said, referring to a plan to raise nationwide sales tax to 10% from 8% in October 2019. He said the finance ministry was still finalizing the figure.
Japan's debt burden is proportionally the highest in the world at more than twice its annual GDP. In comparison, the U.S. debt burden is at around 125% of GDP, Reuters said, citing Organization for Economic Cooperation and Development data.
As of Sept. 3, US$1 was equivalent to ¥111.06.