Japanese government to finalize long-term financial and fiscal roadmap
The Japanese government is expected to announce this year’s economic policy today.
Earlier this month, the Kishida government published a draft policy document highlighting Japan’s strategic vision for transitioning to a growth-oriented economic stage. Compared to last year’s, this year’s policy especially emphasizes addressing labor shortage, SME empowerment, and improving local government fiscal well-being. Notably, there are no measures to curb yen depreciation or mention of repatriation tax cuts.
Japan’s economy is currently navigating a post-pandemic recovery phase, characterized by significant wage increases and a strong investment appetite among companies. Despite these positive developments, inflation driven by rising import prices has outpaced wage growth, weakening private consumption and investment. In response, Japan has followed Kishida’s New Capitalism initiative in 2021 to grasp this once-in-a-lifetime opportunity to overcome deflation and transition to a new economic stage.
As part of the initiative, the document will be Kishida’s third policy piece since his inauguration. Expect more SME empowerment this year as the outcome of the Spring Struggle only reflects part of the employees’ real income. Also, because the Japanese government borrows more than it earns, expect continuing efforts to improve local government fiscal health, and more SME involvement in official developmental assistant (ODA) projects in the global South.
