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A key Finance Ministry panel will propose next month that the government continue efforts to reform public spending and restore the nation’s fiscal health, despite the contingencies being created by the global economic crisis, government sources said.

The advisory panel to Finance Minister Kaoru Yosano will recommend that Japan keep its goal of curbing the natural increase in social security costs by ¥220 billion annually, said the sources, who declined to be named because the decision has not been formalized.

In its set of proposals, expected to be finalized next Wednesday, the Fiscal System Council will also say that lowering the ratio of national debt to gross domestic product will be highly important, instead of just focusing on the primary balance, according to the sources.

The council will point out that the government’s long-held goal of achieving a surplus in the primary balance during fiscal 2011 will be difficult, considering the recent huge rise in spending for stimulus measures to deal with the economic crisis.

A primary surplus is achieved when revenue exceeds spending, excluding bond sales and interest payments.

At a gathering Wednesday, many panel members said focusing on the debt ratio would be preferable because a primary surplus is attainable even if the government’s debt increases along with a rise in bond interest payments, the sources said.

The council is hoping to reflect its proposals in the government’s basic policies for economic and fiscal management for 2009, which is expected to be decided in late June.

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