A government advisory panel on Tuesday stressed the need to strengthen Japan’s fiscal resilience after the Bank of Japan ended its negative interest rate policy earlier this year.
The Fiscal System Council, which advises the finance minister, warned that the country’s finances, already the worst among developed countries, will deteriorate further if debt servicing costs swell.
The central bank in March raised short-term interest rates to a range of zero to 0.1% from minus 0.1%, its first rate increase in 17 years.
The council also called for reforming medical and elderly care services in line with the country’s declining birthrate and aging society.
On social security costs, the council said that it is important to curb public spending and insurance premium burdens. Specifically, it sought to optimize expensive medical services and impose heavier burdens on wealthy elderly people.
The advisory panel also called on the government to maintain its fiscal restoration goal and continue with its fiscal reform efforts to prepare the country for natural disasters and possible contingencies.
The fiscal restoration goal calls for bringing the combined primary budget balance of the central and local governments to a surplus by fiscal 2025 and reducing the ratio of the country’s debts to gross domestic product stably.
Japan’s national debts, including the outstanding amount of government bonds, hit a record high of ¥1,297 trillion as of the end of fiscal 2023.
The primary balance, an indicator of how much expenses to implement policies are covered without the need to issue bonds, has been in the red since fiscal 1992. The debt-to-GDP ratio was as high as some 250%.