By Tetsushi Kajimoto

TOKYO (Reuters – Japan dropped Tuesday’s timeframe for balancing primary budgets in its draft midyear economic policy roadmap. It did this in apparent response to increasing calls for spending stimulus to help the country recover from the effects of the pandemic.

Fumio Kirishia, Prime Minister of Japan’s Mid-Year Draft is his first document since October.

Kishida’s government did not explicitly mention the year target for the balance of the primary budget in its economic policy roadmap. This will be approved next week by his cabinet.

The draft instead urged the need to review the fiscal targets in light of current circumstances.

The government previously promised to have a primary surplus by fiscal 2025. This excludes any new bonds sales or debt servicing costs.

Budget balancing has always been an important indicator that the government can finance its policy spendings without having to rely on debt.

Japan’s determination to repair its crumbling public finances could be questioned if the plan does not include the year as a target.

Takahide Kiuchi (ex-Board of Japan member) said that the description of review could help delay the target. He is now executive economist at Nomura Research Institute.

The global trend of normalising crisis-mode stimuli, which includes Group of Seven (G7) advanced countries, would see this move go against. Japan will be seen as an exception and it is a reminder of the challenges of reducing the burden of industrial debt.

The draft stated that “We won’t abandon the flag for fiscal reform” and would continue to work towards the previously set fiscal reform targets. We must monitor economic conditions at home as well as overseas, including price rises and infections.

According to the draft roadmap, a two-stage strategy was proposed to address uncertainty about surging oil prices. It signalled willingness to implement other economic measures after approval by parliament of Tuesday’s first budget increase in this fiscal year. That extra budget is worth 2.7 trillion Yuan ($21.14 Billion).

According to the draft, “We won’t hesitate to exercise flexible macroeconomic control by keeping a framework to proceed boldly with monetary easing and flexible fiscal policies. We will also implement a growth strategy that spurns private investment.”

“We believe the Bank of Japan will reach its 2% price stability target steadily and stably. This is dependent on the economic, financial and market conditions.”

($1 = 127.7400 yen)