By Tetsushi Kajimoto

TOKYO, Reuters – Japan will issue JGBs (government bonds) for 215 trillion yen (roughly $1.89 trillion) during the next fiscal year. This is after a stimulus program to compensate the effects of COVID-19, which saw bonds totaling 224 trillion yen being issued in this year.

Japan’s population is rapidly aging and the public finances of Japan are in trouble. Shunichi Suzuki, the Finance Minister, stated that Japan faces structural problems in its public finances due to the imbalance between the benefits and the burdens in the Social Security system. However, he also pledged to create a primary budget surplus before the fiscal year 2025.

Japan set the goal to achieve a primary surplus in its budget by 2025 (excluding debt servicing and new bond sales) as part of its efforts to reduce the amount of industrial debt, which is nearly twice that of the country’s $5 trillion economy.

Although fiscal reform is urgent, Prime Minister Fumio Kirshida has prioritized the immediate recovery from the fiscal crisis over the long-term since he assumed office in October.

Suzuki stated that “As total JGB issuance, including rollovers debt, remains high”, and that he would try to issue JGBs stably in close consultation with the market.” He spoke before a plenary of the lower house at the start of the regular session.

“Public finances form the basis of country confidence. We will reform revenue as well as spending to reach the fiscal 2025 primary surplus goal without abandoning fiscal Reform.”

Suzuki explained that although the Omicron version of coronavirus was spreading, the economic situation was still facing severe consequences.

He said that while the economy is expected to rebound due to improved overseas economies and policy support, there were downside risks.

Japan can overcome any crisis after overcoming many obstacles. We need to first get over the crisis and then restore the economy. Then, we must tackle fiscal reform in order for us to hand the future off to the next generation.

In his speech, Kishida pledged to make necessary fiscal expenditures “without hesitation” in order to rebuild the economy. He also promised to tackle fiscal reform.

He stated that he would reverse the downward trend in wages in labour negotiations in early 2012. These are key factors in sustaining an economic rebound backed up by a favorable cycle of growth, wealth distribution and economic expansion.

Japan is determined to increase minimum wages to at least 1,000 yen an hour. This would serve as the national standard. By extending tax reliefs to encourage wage rises, increasing public sector-set salaries and helping small companies pass higher commodity costs onto customers, the government is setting the stage.

($1 = 113.9000 yen)