Japan's cabinet on Tuesday approved the draft budget for the fiscal 2014 as Prime Minister Shinzo Abe targets to balance borrowing and record spending to stimulate economic recovery.

The government plans to spend a record JPY 95.88 trillion in 2014/15. The increase in expenditures for defense, public works projects and social security programs will take overall general account spending to record JPY 72.61 trillion, up by JPY 2.24 trillion from this fiscal.

At the same time, revenues are forecast to reach JPY 50 trillion, the highest in seven years, on an expected 1.4 percent economic growth and planned sales tax hike.

On Saturday, the government raised the economic growth outlook for the fiscal 2014 to 1.4 percent from 1 percent.

The government estimates primary deficit to narrow by JPY 5.2 trillion from this year to JPY 18 trillion in fiscal 2014, which is one of the best improvements on record.

According to the draft report, the Ministry of Finance will sell only JPY 41.25 trillion new bonds in the fiscal 2014, which is less than the JPY 1.6 trillion from this year's initial plan.

The government depends on borrowing to cover 43 percent of its spending. That compares to 46.3 percent this fiscal year. The government plans to submit the draft budget to parliament early next year.

Earlier in the day, Japan's government dropped 'deflation' from its monthly economic report for the first time in four years.

The Cabinet Office noted that consumer prices are firm. But, an official said it is too early to declare that deflation is over. In last month's report, it said "Recent price developments indicate that the deflation is ending."

RTTNews