Post by : Badri Ariffin

Japan is set to change its approach to government spending under Prime Minister Sanae Takaichi, signaling a major shift from the country’s long-standing fiscal discipline. Takaichi plans to introduce a multi-year fiscal target, allowing for more flexible spending to stimulate economic growth.

Traditionally, Japan has followed strict annual fiscal targets aimed at achieving a primary budget surplus. These measures were designed to maintain market confidence amid the nation’s massive public debt, which is currently twice the size of its economy. However, Takaichi has criticized this approach, calling it outdated and restrictive for economic growth.

Her government is exploring steps to cushion the impact of rising living costs, increase investments in strategic sectors, and strengthen Japan’s defense capabilities. Takaichi also left the door open for a potential cut in sales tax, reflecting a policy shift that prioritizes growth over immediate fiscal consolidation.

Economists warn that such expansive spending plans could delay Japan’s long-term goal of achieving a primary budget surplus, initially set for fiscal 2025–26. Yet, Takaichi believes that without boosting investment, the economy cannot grow sustainably, emphasizing a broader, multi-year perspective rather than strict annual targets.

The change could complicate the Bank of Japan’s upcoming decisions on interest rates. The central bank has paused its rate hikes amid global economic uncertainties, but growing discussions suggest a potential increase in the near future. The timing of the BOJ’s next review coincides with Japan’s budget planning, adding another layer of complexity to economic policy coordination.

Japan’s shift marks a clear prioritization of expansionary policies to stimulate the economy, balancing the pressures of rising debt against the urgent need for growth and investment.

#Global News #Business News #Economic