A government advisory panel on Tuesday emphasized the need to strengthen Japan’s fiscal resilience after the Bank of Japan ended its negative interest rate policy earlier this year.
The Fiscal System Council, which advises the finance minister, warned that the country’s finances, already the worst among developed countries, will deteriorate further as debt service costs rise.
The central bank raised short-term interest rates from minus 0.1% to a range of zero to 0.1% in March, the first rate increase in seventeen years.
The council also called for reform of medical services and elderly care, in line with the declining birth rate and aging society.
Regarding the cost of social security, the council said it is important to curb government spending and insurance premium burdens. Specifically, it sought to optimize expensive medical services and impose heavier burdens on wealthy elderly people.
The advisory panel also called on the government to stick to its fiscal recovery target and continue with its fiscal reforms to prepare the country for natural disasters and possible unforeseen events.
The aim of the fiscal recovery is to bring the combined primary budget balance of central and local governments to a surplus by the 2025 financial year and to bring the country’s debt-to-gross domestic product ratio back to a stable level.
Japan’s national debt, including the outstanding amount of government bonds, reached a record high of ¥1.297 trillion at the end of 2023.
The primary balance, an indicator of how much spending to implement policies is covered without the need to issue bonds, has been in the red since the 1992 budget year. The debt ratio was as high as 250%.
