TOKYO (AP) — Japan’s Cabinet approved a record 92.4 trillion yen ($1.11 trillion) draft budget on Friday, aimed at creating jobs and injecting life into the economy.
The budget for next fiscal year, which starts in April, includes measures to provide more education for new job seekers and drive innovation in green energy. Parliament must still approve the budget, and even though the chamber is growing increasingly fractious, the ruling party’s majority in the powerful lower house makes it likely to pass.
The budget reflects the ruling party’s promise to limit new debt, keeping new bond issuance below the level for the current year. It also includes a 7.4 percent cut to foreign assistance and a large cuts in funding for public works projects.
"We were barely able to make the numbers work," Finance Minister Yoshihiko Noda told reporters.
The budget is a crucial balancing act for Japan, which is struggling to keep its economic recovery alive while attempting to cut back on its massive public debt. Prime Minister Naoto Kan has repeatedly said the budget is his top priority, but diplomatic disputes and a scandal have distracted him.
Earlier this week, Japan’s central bank held interest rates at virtually zero and said the recovery "seems to be pausing," while noting that exports are flat. A key central bank survey last week showed that business sentiment fell for the first time in seven quarters.
The government last month passed a $61 billion stimulus package under the current budget, with support for small businesses and regional economies. Kan also announced plans to cut the country’s corporate tax rate by 5 percentage points in a bid to help Japanese businesses stay competitive.
But Kan has struggled to keep the focus on the economy. Despite the stimulus measures, his approval ratings have sunk to around 20 percent in recent voter polls, down to a third of their level when he took power this summer, with wide dissatisfaction over the government’s handling of diplomatic spats with China and Russia.
A battle within the ruling Democratic Party over whether a key figure should appear before parliament for questioning over a financial scandal has also hurt.