July 30, 2019 / 7:03 AM / a month ago

Japan government to earmark $40 billion to boost growth in FY2020/21 budget - sources

FILE PHOTO - Japan's national flag is seen in front of a crane at a construction site at a business district in Tokyo, Japan, January 5, 2017. REUTERS/Kim Kyung-Hoon

TOKYO (Reuters) - Japan will earmark 4.4 trillion yen (£33.28 billion) in the next fiscal year’s budget for measures to spur private demand as well as enhance science and technology as part of Prime Minister Shinzo Abe’s growth strategy, government sources with knowledge of the matter told Reuters on Tuesday.

In an effort to push more funding to growth sectors, the government will urge ministries to trim spending in other areas such as public works by 10 percent from this fiscal year, the sources said on condition of anonymity because they are not authorised to speak to media.

The proposed spending plan, which is set to be approved by Abe’s cabinet later this week, will be part of an outline on the budget for the next fiscal year that begins in April 2020.

The Ministry of Finance will gather spending requests from government ministries by the end of August in accordance with the outline.

This fiscal year’s budget spending reached a record 101.5 trillion yen including 2 trillion yen in steps to ease a blow from a planned sales tax hike to 10% from the current 8% in October. Next fiscal year’s budget is also expected to exceed 100 trillion yen for a second straight year, highlighting the difficulty in curbing fiscal spending at a time of rising economic strains.

The government will not set a ceiling for total expenditure, the sources said, meaning Abe must walk a tight rope as he seeks to balance the imperatives between growth and fiscal reform.

Some analysts say Abe will be willing to boost fiscal spending, depending on the extent to which Japan’s export-reliant economy is affected by the Sino-U.S. trade war and the strained relations between the United States and Iran.

As part of steps to rein in the industrial world’s heaviest public debt, which exceeds twice the size of Japan’s $5 trillion economy, the government has pledged to balance a primary budget excluding new bond sales and debt servicing costs by the fiscal year end to March 2026.

Reporting by Takaya Yamaguchi and Tetsushi Kajimoto; Editing by Shri Navaratnam

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