2 days Ago
Japan's state budget for the next fiscal year is poised to be enacted later Monday after a rare upper house revision following Prime Minister Shigeru Ishiba's backdown on a hike in medical costs, giving a hard-won victory to the minority government only a day before the new year begins. The enactment of the record 115.20 trillion yen budget follows an unusual process in which the coalition-controlled House of Councillors amends a spending proposal before returning it for the approval of the more powerful House of Representatives.
While the ruling Liberal Democratic Party and Komeito party coalition do not hold a majority in the lower house, the opposition Japan Innovation Party is expected to support the revision, ensuring passage of the budget. Lower house decisions on key matters such as budgets take precedence over those of the upper house. When a draft budget plan submitted by the government clears the lower house, it usually means the enactment of that budget is guaranteed.
The expected budget enactment should come as a relief to Ishiba as public support rates for his Cabinet hit new lows due to revelations that he handed out gift vouchers worth 100,000 yen each to rookie LDP lower house members in early March. This brought questions from the public about whether such gift-giving has been a long-held practice among LDP prime ministers, putting further pressure on the ruling party which is already attempting to paper over a damaging slush fund scandal before the upcoming upper house election this summer. Faced with navigating minority rule, Ishiba has underlined the importance of listening to demands from opposition parties and incorporating them into policy whenever possible given the ruling coalition needs their support to pass bills and budgets in the lower house.
Soon after the lower house approved the fiscal budget plan with opposition amendments in early March, Ishiba abruptly shelved a plan to raise medical costs following resistance from opposition lawmakers and patients. The about-face necessitated another change to the budget. In negotiations to get the budget through the lower house the first time, the ruling camp agreed to accept a request from the Japan Innovation Party to expand subsidies to make high school education tuition-free.
It also agreed to a Democratic Party for the People demand that the income threshold for tax payments be raised. The decision to scrap the increase in medical costs was demanded by the main opposition Constitutional Democratic Party of Japan. About a third of the fiscal 2025 budget will go to social security spending.
Japan also plans to spend a record 8.7 trillion yen on defense, in the face of growing security threats from its neighbors China and North Korea. The budget also includes steps to mitigate the pain of rising prices, measures the government believes are necessary despite Japan seeing its strongest wage growth in decades.
When Ishiba's remarks underscoring the need for "powerful" inflation-relief steps were revealed last week by the head of Komeito, some opposition lawmakers expressed concern he was hinting at the need for further spending to address cost of living pressures. Ishiba, however, assured them that he was not implying further budgetary measures will be needed. Even when the budget is passed, Ishiba will continue to face challenges as opposition parties pressure him and the LDP over the acceptance of corporate donations.
The party has yet to shake the issue that came to light when LDP's underreporting of political funds was revealed. The parties are divided over whether to strengthen regulations or to ban such donations outright..
