Japanese Prime Minister Fumio Kishida arrived for a meeting with Laos’ President Thongloun Sisoulith at the Prime Minister’s Office in Tokyo, Japan on Thursday, May 25, 2023. The government of Kishida is committed to prioritizing the economy over fiscal reform, as stated in its draft mid-year policy framework, while also signaling an end to crisis-mode stimulus spending to return to one in “peacetime”. This framework was presented at Kishida’s top economic advisory panel on Wednesday, emphasizing the challenge for Kishida, who is known as a fiscal hawk, in balancing economic growth and fiscal consolidations. The policy framework will be approved by his cabinet this month, along with a separate action plan on his “new capitalism” agenda. The closely-watched document drops the specific budget-balancing target timeframe for a second year, reflecting a compromise that Kishida may negotiate with reflationary forces within his Liberal Democratic Party. Currently, Japan aims to swing a primary budget surplus, which excludes new bond sales and debt-servicing costs, by the fiscal year ending in March 2026. Several rounds of heavy stimulus spending to cope with COVID-19 strained the industrial world’s heaviest public debt, which is more than double the size of Japan’s economy, the world’s third-largest. The framework said the government would conduct a review of its fiscal reform’s progress in the fiscal year 2024 to create a medium-term economy and fiscal scheme.
Japan maintains growth priorities while signaling the conclusion of fiscal largesse in crisis-mode.
