Japan reveals FY2013 draft budget

Likely to target a deficit of 9-10% of GDP.

According to BBVA Research, Japan’s new government unveiled a draft budget over the weekend which we estimate will target a deficit of 9-10% of GDP (including the stimulus measures announced earlier this month), broadly similar to the expected FY2012 outturn (the fiscal year runs from April to March). 

The draft must be approved by the Cabinet before being sent to Parliament at end-February. The government also approved a FY2013 growth projection of 2.5%, from 1.7% previously, on expectations that its stimulus policies will succeed in spurring domestic demand.

"Some analysts may question whether the higher growth projection – which will automatically lead to higher revenue projections - is realistic (we currently project growth of around 1.7%). In the meantime, the government will be seeking to assure markets that the additional debt burden resulting from recent stimulus actions will be manageable, given the already-high debt-to-GDP ratio of around 230%," BBVA said.