The record ¥97.7 trillion general account budget for fiscal 2018, approved by Prime Minister Shinzo Abe's Cabinet last week, features insufficient efforts to put the nation on a steady path for fiscal consolidation. While the government expects tax revenue next year to recover to the levels at the height of the early 1990s bubble boom on the strength of continued growth of the economy and robust corporate earnings, a reduction in its dependency on debt to finance its spending was kept to a minimum as not enough measures were taken to curb spending. Following its recent decision to shelve the target of achieving a primary balance surplus by fiscal 2020, the Abe administration is urged to quickly come up with a credible scenario for fiscal rehabilitation.

The government is under pressure to pursue fiscal consolidation while coping with the mounting policy challenges of the nation's rapidly graying population and its changing security environment. Social security spending including the cost of medical and nursing care services of the expanding ranks of the elderly population, which occupies more than a third of annual expenditures, grew 1.5 percent to a record ¥32.9 trillion, while the defense budget, featuring more spending on missile defense systems in the face of the growing threat posed by North Korea's nuclear and ballistic missile programs, rose 1.3 percent to another record ¥5.19 trillion for the sixth year-on-year increase in a row.

Since taking office five years ago, the Abe administration has emphasized the economy's growth as key to rebuilding the government's fiscal health, in which outstanding public debt has topped 230 percent of the gross domestic product. It has stressed flexible fiscal spending in its efforts to pull the nation out of deflation. The general account expenditures kept hitting record highs for six years under Abe's watch.