By Daniel Leussink and Tetsushi Kajimoto
TOKYO (Reuters) – A draft annual policy roadmap won’t directly mention Japan’s target of achieving a primary budget surplus by fiscal 2025, Jiji news agency reported, signalling the government will soft pedal on fiscal reform while fighting the coronavirus downturn.
Saddled with a public debt burden that is more than twice the size of the economy and the heaviest in the industrial world, Japan has embarked on fiscal reforms, and their success can be measured by trends in the primary budget balance, which excludes new bond sales and debt servicing costs.
In the wake of the coronavirus crisis, however, Japan, like many countries, has rolled out massive fiscal stimulus plans. The stimulus so far is equivalent to more than 40% of GDP, making the prospect achieving a budget surplus more distant than ever.
Prime Minister Shinzo Abe’s cabinet is expected to endorse the mid-year policy roadmap on July 17, which lays out the government’s long-term economic and fiscal policy framework.
The mid-year roadmap, drawn up yearly by the Council on Economic and Fiscal Policy (CEFP), Abe’s top economic advisory panel, also provides the basis for next fiscal year’s budget.
Abe’s government initially set its goal of achieving a primary budget surplus by the March fiscal year end in 2021. But it has pushed back in 2018 the target by five years to fiscal 2025.
Dropping a reference to the fiscal target in the key annual policy roadmap would not necessarily mean the government has given up on it altogether, sources with direct knowledge of the debate told Reuters.
Instead, plans on how to achieve the fiscal goal could be put off until a time when the current fog uncertainty begins to lift, they said.
Meantime, ruling party lawmakers who favour unlimited money printing could keep up pressure on the government to guide the country out of recession through unbridled spending.
“Fiscal issue will be a contentious source of debate,” one of the sources said.
(Reporting by Daniel Leussink and Tetsushi Kajimoto; Editing by Simon Cameron-Moore)
