Japan has taken a baby step toward reducing its bloated budget to a pre-pandemic level, but fiscal spending pressures on the government may not ease any time soon.

A projected expansion of nominal gross domestic product beyond ¥600 trillion ($4 trillion) for the first time may bring about the Bank of Japan's gradual shift toward policy normalization and higher debt-servicing costs.

It is a make-or-break moment for Prime Minister Fumio Kishida because he believes Japan is about to seize a chance to finally break with deflation. He has vowed to extend government support to ensure wage growth, a critical determinant in achieving that goal, and to strengthen key sectors that will be essential for Japan's longer-term growth.