The
first annual economic policy blueprint under Prime Minister
Yoshihide Suga underscored the need to strike a delicate balance
between spurring post-pandemic growth and curbing the industrial
world's heaviest public debt burden.
There was no change in the blueprint to its wording on the
fiscal target from an earlier draft, in which the government
said it would "aim to bring the primary balance into a surplus
by fiscal 2025 while stably lowering the debt-to-GDP ratio.
"However, we will reassess the timeframe by the end of the
current fiscal year, while considering the still unstable
economic and fiscal situation due to the pandemic's impact,"
read the blueprint, which was approved by the cabinet on Friday.
The blueprints provide a basis for the next fiscal year's
budget. Last year, it dropped the reference to the timeframe for
the first time, as Japan had rolled out huge spending packages
to ease the pain from the pandemic.
"It's true the situation is severe" for Japan to meet its
primary budget surplus in fiscal 2025, Finance Minister Taro Aso
told reporters after the cabinet approved the blueprint.
Still, "we will strive to achieve both economic growth and
fiscal reform," he said.
The government's plan leaves some wiggle room in the budget
timeframe as it comes under pressure from some ruling party
lawmakers seeking even bigger spending and as the country's
economic recovery remains fragile.
"It's difficult to achieve a primary budget surplus in fiscal
2025, as coronavirus impacts linger in public finances while
pressure will mount on boosting green-related spending," said
Takuya Hoshino, economist at Dai-ichi Life Research Institute.
The blueprint cited green, digital, local regions and childcare
as key areas of investment to drive growth in the post-coronavirus
era.
"Japan could debate corporate tax hike to meet necessary fiscal
demand for greener society, following the footsteps of Britain
and the united States," Hoshino said.
Having pushed back the target a few times, Japan has pledged to
meet a primary budget surplus, which excludes new bond sales and
debt servicing costs, by the fiscal year-end in March 2026.
(Reporting by Tetsushi Kajimoto; Editing by Kim Coghill)
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