Japan's Cabinet on Tuesday endorsed a record-high 92.6 trillion yen ($1.02 trillion) general budget for the coming fiscal year that would increase defense spending for the first time in 11 years and boost public works projects.
The 4.75 trillion yen ($52.5 billion) in proposed defense spending, up 0.8 percent from last year, is partly aimed at beefing up Japan's coastal and marine surveillance around islands also claimed by China and Taiwan.
Prime Minister Shinzo Abe has pledged to do whatever it takes to get the economy out of recession and restore sustainable growth, through both strong stimulus spending and monetary easing.
Including a supplementary budget to help cover costs through March 31, the government has set its spending plans through March 2014, Chief Cabinet Secretary Yoshihide Suga told reporters.
"I think it's a lean budget that Prime Minister Abe was aiming at," Suga said. "We compiled the budget plan with a sense of urgency that there was not a single day to waste."
The budget still requires the approval of parliament, which is expected by the end of February.
Abe, a staunch nationalist who came to office following a landslide victory by his Liberal Democratic Party last month, also favors a firm stance toward China in a dispute over uninhabited islands in the East China Sea. The dispute flared last year under the previous administration, led by the Democratic Party of Japan.
The budget endorses a Defense Ministry plan to base more troops, ships and aircraft around the disputed islands.
"Our nation faces increasingly active operations by China in and around our seas and skies, including intrusions of our territorial waters and violations of airspace. We must give this sufficient consideration," the ministry said in an outline of its budget proposals.
Apart from that challenge, Japan has a huge and rising public debt and surging social welfare costs thanks to its fast-aging population.
Nearly half the budget for fiscal 2013, which begins April 1, will be financed by new government bonds. Japan will spend almost a quarter of it on servicing its national debt, which has ballooned to more than twice the size of its economy.
Social security spending will rise 10 percent to 29.12 trillion yen ($322 billion).
The government is earmarking 25 trillion yen ($276 billion) for fiscal 2011-2015 for reconstruction from the March 2011 earthquake and tsunami disasters that devastated Japan's northeastern coast and brought on the worst nuclear accident since Chernobyl.
Outlays on public works will jump 15.6 percent to 5.3 trillion yen ($58.6 billion). Abe promised during the campaign to hike spending on public works such as the country's aging system of roads and tunnels.
The Liberal Democrats relied heavily on construction spending to reward supporters and fuel growth in the past, but that formula may have outgrown its usefulness, critics say.
The country's success in fostering sustainable growth and emerging from over two decades of economic stagnation, Abe has said, also hinges on tax and government reforms and other policies aimed at restoring the country's lagging competitiveness.
Associated Press writers Mari Yamaguchi and Eric Talmadge contributed to this report.
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