Japan’s new prime minister needs to establish a clear fiscal consolidation target after achieving budget balance, according to government adviser Takero Doi. A potential approach could involve setting a budget surplus-to-GDP target to maintain fiscal health, suggested Doi, an economics professor at Keio University and adviser to the Finance Ministry. This strategy would help reduce Japan’s public debt-to-GDP ratio, Doi stated in a recent interview.
Currently, Japan’s primary balance—the difference between government revenue and expenditure excluding debt interest—is expected to turn positive in fiscal 2025 after several postponements, based on Cabinet Office projections. “The focus should be on plans following the achievement of the primary balance target,” Doi emphasized.
The ruling Liberal Democratic Party is poised to choose a new leader on September 27, with the chosen candidate likely to become the prime minister due to the party’s parliamentary majority. The incoming leader must address Japan’s considerable debt, which exceeds twice the nation’s GDP, the highest among major economies.
Doi cautioned that substantial spending and debt accumulation now could limit future policy options for subsequent leaders. As the central bank gradually increases interest rates, the added burden of public debt could reduce future policy flexibility. By fiscal 2027, interest expenses on government bonds are anticipated to climb to ¥15.3 trillion, a 60% increase from the current fiscal year, according to the Finance Ministry.
The article, produced from an automated news agency feed, was facilitated by Yoshiaki Nohara.
Original Story https://www.livemint.com/news/world/japans-new-premier-should-set-fresh-fiscal-target-adviser-says-11725312021343.html
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