© Reuters. FILE PHOTO: Office workers cross the street in heavy rain in a business district in Tokyo, Japan, April 7, 2023. REUTERS/Androniki Christodoulou
Written by Tetsushi Kagimoto and Yoshifumi Takemoto
TOKYO (Reuters) – Japan on Friday unveiled an outline of its medium-term economic roadmap that outlines Prime Minister Fumio Kishida’s policy priorities, such as efforts to stem a declining birth rate while increasing spending on child care.
The blueprint, which will serve as the backbone of the government’s economic policy roadmap due to be completed in June, does not indicate how these spending measures will be financed – a major sticking point ahead of a potential snap election Kishida could call later this year.
In Japan, fiscal reform is an urgent task for highly indebted governments in the industrialized world where public debt is more than 250% of GDP. However, rounds of massive anti-COVID stimulus spending have put the primary budget balancing target, excluding new bond sales and debt servicing costs, by the end of fiscal 2025, out of reach.
In addition to its already heavy debt burden, Kishida plans to double Japan’s military spending to deal with threats from China and North Korea, while also doubling spending on childcare.
With his approval ratings improving after successfully presiding over this year’s G7 summit, some local media reported that Kishida may call snap elections by the end of the current parliamentary session on June 21.
The prospect of a close election could delay a much-needed debate over how to fund Kishida’s spending wish list that includes childcare — which is set to cost an extra 3 trillion yen for each of the next three years.
Kishida ruled out increasing consumption tax to fund the cost. Some ruling party MPs have called for a bond issue, although the government says no decision has been taken.
Although elections for the powerful lower house of parliament are not scheduled until 2025, Kishida could call an early election when the opposition is still weak because a win would help him consolidate his grip on power within his ruling party.
