Kaori Kaneko and Tetsushi Kajimoto

TOKYO, Reuters – Japan should immediately deploy fiscal stimulus in an effort to address the current economic crisis. The draft guidelines of the fiscal 2022 budget by the government showed that Japan must prioritise the efforts to stabilize the economy rather than fixing its crumbling public finances.

Reuters saw the budget guidelines. They dropped a reference regarding “reviewing spend without sanctuary”. This was an expression of commitment to fiscal discipline that had been added in recent years.

Draft stated, “We will immediately deploy the necessary fiscal spending in crisis to address crises” and that we would take all measures to stop deflation. We mustn’t misinterpret the order. First, we will rebuild the economy. Then, we will tackle fiscal reform.

Japan’s economy is not recovering strongly from the pandemic-induced slump last year, unlike many other countries. The third quarter saw a contraction much quicker than anticipated due to global supply disruptions that impacted exports and business spending. Meanwhile, new COVID-19 cases lowered consumer mood.

Fumio Kirishida, Prime Minister of Japan, is expected to approve the guidelines later in this month. These guidelines will be the foundation for the next fiscal-year’s budget, which is expected to be completed later in the month.

After being diluted by members of the Liberal Democratic Party to increase fiscal stimulus in advance of the next summer’s elections, the draft guidelines were finally approved Friday by the Liberal Democratic Party.

To cushion the impact of the COVID-19 pandemic, the fiscal 2022 budget and the extra budget for this year will be combined.

Reuters spoke to a top LDP lawmaker who said that spending more is necessary for the upcoming elections due to the uncertainty surrounding risk variants such as Omicron. This is despite Japan’s second-largest public debt, which amounts more than double the country’s economy.

Tatsuo Fukuda, LDP General Council chair, stated that “now is the best time to concentrate on mobilising fiscal expenditure and increasing growth expectations of the public.” However, fiscal reform cannot be ignored.

($1 = 113.1800 yen)