Japan aims to achieve primary budget surplus in FY’25

Japan is determined to achieve a primary budget surplus by the next fiscal year (FY2025) to tackle its significant public debt, which is more than double the size of its GDP, according to a draft of its annual economic and fiscal policy guidelines.

Japan has had a deficit in its primary budget for most of the post-war period, except for a brief period between 1986 and 1991. This has led to the highest public debt-to-GDP ratio in the industrialised world.

The draft acknowledges the unique opportunity to achieve both economic growth and fiscal health. It emphasises the need for continued efforts to reduce spending alongside pursuing robust economic growth.

However, the draft assures that this primary surplus goal wouldn’t restrict the government’s ability to implement essential policies during unforeseen economic circumstances.

The document underscores the importance of close collaboration between the government and the Bank of Japan. It emphasises the need for “flexible” policy guidance to foster sustainable economic growth driven by private sector demand.

This likely reflects the Bank of Japan’s recent shift away from negative interest rates implemented for the past eight years.

The draft policy guidelines will be presented for discussion by ruling party lawmakers before finalisation at a cabinet meeting scheduled for June 21st.

Arrtibution: Reuters