Japan unveils record budget

Japan unveiled a budget proposal today, which, if approved, would push spending to record levels as the government scrambles to battle an ever-deepening recession.

The Finance Ministry’s draft budget suggested a spending increase of 6.6% to 88.5 trillion yen (€71bn) for the next fiscal year – the biggest ever figure in an initial proposal.

The world’s second-largest economy fell into a recession in the third quarter, and the signs since then point toward more misery ahead. The latest outlook by the Cabinet Office projects Japan’s economy to shrink this fiscal year and manage only flat growth the following year.

The expansion is likely to derail Tokyo’s efforts to slim down toward its goal of balancing the budget by 2011. But Prime Minister Taro Aso, facing plummeting popularity ratings, has made it clear that this is no time for fiscal discipline.