TOKYO -- Prime Minister Shinzo Abe hopes to put expanded tax revenue toward social programs to address population decline and aging, but others insist the funds be used to shore up the country's finances or provide tax breaks.

Thanks to the recovering economy, tax revenue for the year ending March 2017 will likely be 21 trillion yen ($176 billion) higher than in fiscal 2011, Abe said Monday. Those additional funds should be invested in child- and nursing-care programs to create new growth, he added.

The Council on Economic and Fiscal Policy will begin discussing how to use the funds within the month. Of the additional tax revenue, 14.8 trillion yen will be collected by the national government, including 6.3 trillion yen resulting from the consumption tax hike to 8% in April 2014. The present debate is over the remaining 8.5 trillion yen.

The fiscal 2016 budget is the current Abe government's fourth. The first, for fiscal 2013, anticipated 43.1 trillion yen in revenue. Income that year in reality climbed to 47 trillion yen, generating a 3.9 trillion yen windfall. Fiscal 2014 brought 4 trillion yen more than anticipated, while fiscal 2015 revenue likely will rise 2 trillion yen higher than budgeted. The windfalls have made the government bolder about stepping up spending.

Policy struggles

Government agencies have already made their policy proposals for the fiscal year. The education ministry is calling for pre-school programs to be made free of charge -- part of efforts to raise Japan's birthrate to 1.8. Doing so for three-to-five-year-olds would take more than 700 billion yen. Only around 25 billion yen is allotted to the project in the fiscal 2016 draft budget adopted in December.

Under the Abe government's plan of unified tax and social security reform, more than 1 trillion yen is to be put toward supporting child care. Only 700 billion yen has been secured so far. The government would like to see the difference covered by the additional tax revenue.

Lawmakers are also struggling to strike a balance between supporting initiatives to address population issues and creating exceptions to a coming consumption tax hike to 10%. The current tax exception plan will cost around 1 trillion yen. Many hope to use rising revenue for that as well.

Containing budget growth

Ideological concerns are also at stake. Until now, tax revenue windfalls have been put toward improving Japan's finances, while funding new policies has in principle necessitated budget cuts elsewhere.

The fiscal 2016 draft budget is nevertheless the largest ever at 96.7 trillion yen as pension, medical and other social security costs swell. Some 34 trillion yen in government bonds will be issued to fund that spending, putting total debt at an estimated 1,062 trillion yen by March 2017. If using increased revenue to fund policy becomes standard practice, "expenditures will never stop rising," a Finance Ministry official said.

Reliance on rising revenue could also cause debt issuance to balloon if the economy heads into another downturn. While a booming stock market and weakening yen since the end of 2012 have boosted the economy and tax income, how much of that is due to policy rather than a broader upswing is up for debate.

(Nikkei)