By Yoshifumi Takemoto and Tetsushi Kajimoto
TOKYO (Reuters) – Japan’s government made no mention of a timeframe for balancing the primary budget in its draft mid-year annual long-term economic policy roadmap, two government sources with knowledge of the matter told Reuters.
The government has previously pledged to achieve a primary budget surplus, which excludes new bond sales and debt servicing costs, by the end of fiscal 2025, which was seen as an elusive target given the state of Japan’s public finances.
The budget balancing target has served as a key gauge for the government to finance policy expenditures without relying on debt — as part of efforts to rein in the industrial world’s heaviest public debt at twice the size of Japan’s economy.
The absence of the target year in the mid-year policy roadmap could raise questions about Japan’s resolve to fix its tattered public finances.
“This means the government may deliver a message that it will prioritise growth and growth-oriented investment,” said Daiju Aoki, chief Japan economist at UBS Sumi Trust Wealth Management. “That would boost fiscal spending in the name of growth investment near term.”
Jiji newsagency reported that the draft said the current target year could “distort” macroeconomic policy options depending on situations at the time, while removing the words such as “fiscal 2025” which was included in the previous roadmap.
The draft paid consideration towards fiscal reflationists within Prime Minister Fumio Kishida’s ruling Liberal Democratic Party (LDP), the government sources said.
Kishida has come under pressure from those fiscal doves over the COVID-19 pandemic and rising cost of living.
They remain at loggerheads with fiscal hawks within the LDP.
The draft also said the government would not abandon the flag of fiscal reform and it would tackle the previous fiscal target, apparently out of consideration towards fiscal hawks within the LDP, Jiji newsagency reported.
(Additional reporting by Daniel Leussink and Kantaro Komiya; editing by Jason Neely and Jane Merriman)
