© Reuters. FILE PHOTO: Japanese Prime Minister Fumio Kishida speaks during a bilateral meeting with visiting U.S. President Joe Biden in Hiroshima, Japan, May 18, 2023. Kiyoshi Ota/Pool via REUTERS
By Takaya Yamaguchi and Tetsushi Kajimoto
TOKYO (Reuters) – Japan will not detail a time frame for balancing the primary budget in its mid-year economic policy for the second consecutive year, showed a draft seen by Reuters, underscoring Prime Minister Fumio Kishida’s focus on bolstering the economy.
The plan comes amid speculation that Kishida could call a snap election in coming months to solidify his grip on power within Japan’s ruling party.
“The absence of a target year highlights the fact that the government lacks a sense of crisis over Japan’s fiscal situation,” said Atsushi Takeda, chief economist at Itochu Economic Research Institute.
“Given the government’s struggle to secure funding sources for Kishida’s key policy agenda such as childcare, policymakers may find it even more difficult to stipulate a target year.”
The annual policy, to be adopted by Kishida’s cabinet this month, is widely considered a key gauge of the government’s will to restore fiscal health.
Until 2021, the government pledged to achieve a primary budget surplus – which excludes new bond sales and debt servicing costs – by the end of fiscal 2025, a target analysts see as unlikely.
The time frame was removed last year as Japan ramped up spending to cushion the economic blow of the COVID-19 pandemic.
“We will not abandon the flag of fiscal reform and we will aim for the previous fiscal reform target,” showed the draft outline of this year’s policy framework.
“(Supporting the) economy must come before (fixing Japan’s) finances. The current target year must not distort options for macroeconomics policy,” it said, calling for close attention to rising prices and the economic situation at home and overseas.
The framework also called for reviewing progress on comprehensive reform of economy and finances, as fiscal 2024 marks the end of the three-year period of estimated expenditure which provides the assumption for annual budget compilation.
The budget-balancing goal has served as a gauge for the government to finance policy expenditure without relying on new debt.
Japan remains an outlier among advanced nations in weaning their economies off pandemic-related fiscal and monetary support.
The International Monetary Fund (IMF) has called on Japan to take a more targeted approach in supporting households hit by the pandemic.