The forthcoming Lower House election will test the economic policies of political parties more severely than did previous general elections. The reason is obvious: While industrial restructuring and economic recovery are making only slow progress, the national debt burden has reached a staggering 650 trillion yen -- a sum larger than even the nation's gross domestic product. Mapping out a credible blueprint for fiscal reform is now an urgent priority. Without deficit-cutting plans, slogans of "economic revival" sound hollow.
The question is how to promote both economic growth and deficit reduction, and not one or the other. But political parties have yet to present a realistic program to achieve these twin objectives. The hardest part is making a road map for fiscal reform that does not include major tax increases. In the short run, calls for erasing public concern about a rise in the tax burden will help get votes. In the long run, however, that would do a disservice to efforts to restore a healthy budgetary balance.
During the past decade, all successive Cabinets have followed essentially the same "spend now, pay later" policy that has focused on stimulating the economy. The assumption was that deficit spending would in due course generate sustainable growth and raise tax revenues sufficiently to allow the government to more or less balance the budget.