Japan has drawn up another record initial budget for the coming fiscal year, increasing the world's largest debt among developed nations.

According to documents obtained by Bloomberg, the budget for the year beginning in April will total about 114.4 trillion yen ($867 billion). According to the plan, most of it will be spent on social welfare spending.

Another key item on the spending list is about 6.8 trillion yen for defense, up from 5.4 trillion yen this year. Defense spending, which will account for about 6% of total spending, has been at the center of the debate in the ruling party.

On the revenue side, Japan is enjoying a record tax revenue of about 69.4 trillion yen, up from 65.2 trillion yen this year, pointing to the country's recovery from the pandemic.

According to the documents, the government expects about 35.6 trillion yen in bond financing to cover most of the remaining costs. Although the amount is down slightly from this year's 36.9 trillion yen, it still means that the debtor country needs to borrow more than 30 percent of the funds needed to finance the budget.

According to the International Monetary Fund, Japan's public debt reached a record 264% of its gross domestic product this year. Even with the Bank of Japan's current minimum interest rates, the country will need to spend about 25.3 trillion yen on debt service next year.

Meanwhile, government officials say they will continue to strive to balance the budget, excluding debt-service costs, by fiscal 2025.