Tokyo - Japan's cabinet was Tuesday set to approve 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 is expected to approve a ¥92.61 trillion budget for fiscal 2013, with revenue estimated at ¥43.10 trillion and new bond issuance at ¥42.85 trillion - the first time in four years revenue will have been greater than new bond issuance, local reports have said.
The budget is down from the ¥92.9 trillion allocated in the fiscal 2012 initial budget, the first decrease in seven years, they said.
But the defence budget is up by ¥40bn or about 0.8% from the previous year to ¥4.75 trillion, the first rise in 11 years, at a time Japan is embroiled in a row with China over a chain of islands in the East China Sea.
Beijing has repeatedly sent vessels to the disputed waters, prompting calls in Japan for more measures to defend the Tokyo-controlled islands, called the Senkakus in Japan but known as the Diaoyus in China.
Defence Minister Itsunori Onodera has said the military will add nearly 300 personnel to help defend the disputed islands.
Meanwhile, public works spending rises for the first time in four years, growing by ¥710bn to ¥5.29 trillion, reports said.
Prime Minister Shinzo 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 ¥1.4 trillion from the preceding year to ¥42.85 trillion, Jiji Press said.
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.