O Japan is committed to putting economic growth above fiscal reform, the prime minister’s government said, Fumio Kishidain a mid-year commentary on the policy framework, while signaling an end to stimulus spending to return to a “peacetime” mode.
The plan, presented at Kishida’s top economic advisory panel on Wednesday, underscores the challenge for the leader, who is seen as aggressive in controlling spending, to find a balance between economic growth and fiscal consolidation.
Japan has the heaviest public debt in the industrial world, which is more than twice the size of its economy, the third largest in the world. Like many other countries, the country is now facing additional fiscal strains due to heavy spending launched to cushion the economic impact of the COVID-19 pandemic. Covid-19.
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“As we emerge from the coronavirus crisis and as the economy normalizes, we strive to prevent crisis-time fiscal spending from being prolonged, while bringing the spending framework back to peacetime” , said the draft report.
The policy framework will be approved by Kishida’s cabinet this month, along with a separate action plan on his “new capitalism” agenda.
“Japan has been an outlier in the global trend away from stimulus in crisis mode. Policy normalization is definitely a step in the right direction,” said Takahide Kiuchi, executive economist at Nomura Research Institute.
For the second straight year, the framework has cut a specific deadline for balancing the budget, reflecting a compromise Kishida can make with forces within his Liberal Democratic Party. Analysts view the budget balance target as highly symbolic.
“We will not abandon the banner of fiscal reform,” Economy Minister Shigeyuki Goto told reporters after the panel meeting. “There is no change in the government’s stance of seeking a primary budget surplus in fiscal 2025,” added Goto.
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Japan currently aims to run a primary budget surplus, which excludes new bond sales and debt service costs, by the fiscal year ending March 2026.
The framework said the government will conduct a review of any progress of its fiscal reform in fiscal 2024, in order to create a medium-term savings and fiscal framework.
Source: Moneytimes
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