TOKYO, Dec 25 Reuters Japan39;s government is set to compile a record 734 billion budget for the fiscal year from April due to larger social security and debtservicing costs, adding to the industrial world39;s heaviest debt, a draft plan seen by Reuters showed.

The record 115.5 trillion yen budget comes as the Bank of Japan shifts away from its decadelong stimulus programme, which means that the government can no longer rely on ultralow borrowing costs and on the central bank to effectively bankroll debt.

In a show of will to improve public finances, however, the government plans to trim new bond issuance in the next fiscal year to 28.6 trillion yen from an initially planned 35.4 trillion yen for this year thanks to tax revenue growth, the draft showed.

It is the first time that new bond issuance will drop below 30 billion yen in 17 years.

Tax revenue is estimated at a record 78.4 trillion yen thanks in part to recovery in corporate profits, according to the draft.

The assumed interest rate would increase to 2 for the year starting in April from the current year39;s 1.9, boosting debtservicing costs for interest payments and debt redemption to 28.2 trillion yen from 27 trillion yen for the current year.

1 157.2900 yen

Reporting by Takaya Yamaguchi, Makiko Yamazaki and Kaori Kaneko; Editing by William Mallard and Raju Gopalakrishnan

Source Reuters