TOKYO, Jan 29: Japan’s cabinet on Tuesday approved a $1.02 trillion annual budget with boosts in defence and public works spending amid a festering territorial row with China and a renewed assault on deflation.

The cabinet approved a 92.61tr-yen ($1.02tr) budget for fiscal 2013, with revenue estimated at 43.10tr yen and new bond issuance at 42.85tr yen — the first time in four years revenue will have been greater than new bond issuance.

The budget is down from the 92.9tr yen allocated in the fiscal 2012 initial budget, the first decrease in seven years. But the cabinet approved a $52bn military budget, a boost in both financial and personnel resources for the first time in years. The budget plan is 40bn yen, or about 0.8 per cent up on the previous year to 4.75tr yen, defence ministry officials said.

Excluding some monies related to the US bases, it is the first rise in the pacifist nation’s military spending in 11 years, they said. The ministry will also increase the number of troops by 287, aiming specifically at “improving readiness of units to ensure intelligence, warning and surveillance and safety in the south-western region”, it said.

The Tokyo-controlled Senkaku islands, which China claims as the Diaoyus, are included in this designation. The boosted military budget plan came after hawkish Prime Minister Shinzo Abe scrapped Japan’s long-term basic defence programme, adopted in 2010 under the thrifty centre-left Democratic Party of Japan.

Beijing has repeatedly sent vessels to the area, prompting calls in Japan for more measures to defend the islands, which are believed to sit atop sizable mineral reserves. Meanwhile, public works spending rises for the first time in four years, growing by 712bn yen to 5.29tr yen.

Abe, who took office in December, has pledged to pull Japan out of years of deflation by active government spending coupled with aggressive monetary easing by the Bank of Japan. Abe’s government announced a $226.5bn stimulus package earlier this month.

In the fiscal 2013 budget, the issuance of new government bonds decreases by 1.4tr yen from the preceding year to 42.85tr yen. The government is planning an $86bn bond sale to pay for the stimulus, stoking fears about spending by Tokyo, which already owes creditors cash equal to twice the size of its economy. —AFP