TOKYO (Reuters) – Japanese Prime Minister Shinzo Abe’s office on Wednesday approved a record $ 812 billion budget for the fiscal year beginning April 1, while cutting new borrowing for the third year in a row in a bid to balance growth and tax reform.

The proposed general account budget of 96.3 trillion yen ($ 812.45 billion), the third since Abe took office in late 2012, marks an increase from the initial 95.88 trillion yen of this year, reflecting the increase in social and military spending.

Expected increase in tax revenue to 24-year high of 54.53 trillion yen on expected economic recovery allows Tokyo to reduce new bond issuance to six-year low of 36.86 trillion yen . This represents 38.3% of the budget, the lowest for six years.

With Japan’s public debt exceeding double its gross domestic product (GDP), the heaviest burden in the industrial world, Abe has sought to restore fiscal health while boosting growth in the world’s third-largest economy.

“I think the budget will help both economic recovery and fiscal consolidation,” Abe told reporters.

Abe said Japan was on track to deliver on its pledge to halve the primary budget deficit – excluding new bond sales and debt servicing – in the next fiscal year from levels seen in 2010/11. But the improvement is largely the result of windfall tax revenues from rising corporate profits under the easy money policies of the “Abenomics”.

Last month, Fitch Ratings threatened to lower its A plus rating on Japan’s public debt if the budget did not offset income from Abe’s postponement of a planned sales tax hike.

“This budget highlights the slow pace of fiscal consolidation and highlights the risk of relying too much on growth to cover increased spending,” said Yasuhide Yajima, chief economist at the NLI Research Institute. “It is impossible to achieve a primary fiscal balance without credible spending restraint measures.”

Masaki Kuwahara, senior economist at Nomura Securities, said the budget was neutral for his forecast of 2.2% GDP growth for the next fiscal year.

The budget forecasts that the primary budget deficit will shrink from 4.6 trillion yen to 13.4 trillion yen. But the Ministry of Finance’s projections show that without additional efforts, the government will not be able to keep its promise to balance the budget by 2020/21.

The biggest budget item, social protection spending, will increase by 1 trillion yen to a record 31.53 billion yen.

Defense spending also hit a record 4.98 trillion yen, up about 100 billion yen from this fiscal year and up for the third year in a row, reflecting Abe’s ambition to counter the China’s growing military power.

Despite the reduction in the budget deficit, the growing stock of debt will push interest payments and repayments from 200 billion yen to a record 23.45 trillion yen.

($ 1 = 118,5800 yen)