By Tetsushi Kajimoto
TOKYO (Reuters) – Japan dropped a time frame for balancing the primary budget in its draft mid-year economic policy roadmap on Tuesday, in an apparent move to meet growing calls for stimulus spending to reflate the pandemic-hit economy.
The mid-year draft is Prime Minister Fumio Kishida’s first since taking office in October.
Kishida’s government made no explicit mention of the target year for balancing the primary budget in the economic policy roadmap, to be approved by his cabinet next week.
Instead, the draft urged necessary review of the fiscal target in accordance with the situation.
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, seen as an elusive target.
The budget balancing goal has served as a key gauge for the government to finance policy expenditures without relying on debt.
The absence of the target year in the policy plan could raise questions about Japan’s resolve to fix its tattered public finances.
“The description about review may pave the way for delaying the target,” said Takahide Kiuchi, a former Bank of Japan board member who now serves as executive economist at Nomura Research Institute.
The move would go against the global tide of normalising crisis-mode stimulus, including Group of Seven (G7) advanced economies, making Japan an outlier and highlighting the challenge to rein in the industrial world’s heaviest debt burden.
“We will not abandon the flag of fiscal reform and tackle the previous fiscal reform target,” the draft said. “However, we need to closely watch economic situations at home and overseas including the impact from infections and price hikes.”
The draft roadmap called for a “two-stage approach” to deal with uncertainty over surging oil and other prices, signalling readiness to adopt other economic measures following the first extra budget worth 2.7 trillion yen ($21.14 billion) for this fiscal year, approved by parliament into law on Tuesday.
“We won’t hesitate to conduct flexible macroeconomic management by maintaining a framework to proceed with bold monetary easing, flexible fiscal policy and growth strategy aimed at spurning private investment,” the draft said.
“We expect the Bank of Japan to realise its 2% price stability target sustainably and stably, depending on the economy, prices and financial situations.”
($1 = 127.7400 yen)
(Reporting by Tetsushi Kajimoto; Editing by Jacqueline Wong)
