June 11 2024: Japan is set to maintain its goal of achieving a primary budget surplus in the next fiscal year, according to a draft of the annual policy guidelines for budget planning.
The government also intends to continue efforts to reduce the ratio of debt to gross domestic product (GDP), the draft stated.
Based on a government projection from January, a primary budget surplus for the world’s fourth-largest economy could “come into sight” in fiscal 2025, provided strong economic growth and continued efforts to cut spending.
Japan’s primary budget balance, which excludes new bond sales and debt servicing costs, has been in deficit for most of the postwar era, except during the asset bubble period between 1986 and 1991.
Consequently, Japan now holds the industrial world’s highest public debt, exceeding twice the size of its economy. The country first set the goal of achieving a primary budget surplus in the early 2000s, but target dates have been repeatedly postponed.
“Japan now faces unprecedented opportunities to fully exit deflation and achieve growth,” the draft stated. “We need to move forward to attain both an economic revival and fiscal health.”
However, the draft emphasized that the goal of a primary budget surplus should not restrict the government from employing key policy options in specific economic circumstances.
The draft also stressed the necessity for the government to collaborate closely with the central bank and guide policy “flexibly” to achieve sustainable economic growth driven by private sector demand.
“Monetary policy has entered a new stage,” it noted, highlighting that the Bank of Japan ended eight years of negative interest rates in March.
The government draft will be presented to ruling party lawmakers for deliberation before being finalized at a Cabinet meeting on June 21.
4o