Discussions over the government's new fiscal consolidation plan — after its earlier target of achieving a surplus in the primary budget balance in fiscal 2020 was abandoned — highlight the bind that the nation is in as it seeks to rebuild its fiscal health.
Even as the government pushes back the target by five years to fiscal 2025, it seems to be counting on higher economic growth and tax revenue increases of a level that Japan has not seen in years to cut the budget deficit. Despite robust corporate profits, the economy's growth can't be counted on to pick up sufficient speed given the nation's shrinking and aging population, which is also boosting social security expenses and inflating government spending. Yet either significantly cutting such spending or increasing the public's financial burden through tax increases and social security premium hikes to trim the deficit would be politically challenging and portend ill for the economy's future growth.
As the government struggles to put together a credible road map to fiscal consolidation in the face of this reality, citizens of this country should also grapple with the question of how the nation's fiscal health can be regained.