TOKYO: Japanese Prime Minister Fumio Kishida vowed on Monday to pull the economy out of COVID-19-induced doldrums by closely communicating with the Bank of Japan, while promoting investment to spur flagging growth.
Kishida told a meeting of his top economic advisory panel he wants Economy Minister Daishiro Yamagiwa to prepare for the release of a mid-year policy roadmap next month.
The Council on Economic and Fiscal Policy (CEFP) unveiled an outline for the roadmap on Monday, focusing on investment in areas like human resources, innovation, the environment, digital and start-ups to achieve what Kishida calls “new capitalism.”
The outline, Kishida’s first, called for sustainable economic and fiscal policy in the midterm, signaling a gradual shift away from fiscal stimulus under his predecessor Shinzo Abe’s reflationary policy dubbed “Abenomics.”
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It also called for creation of a sustainable social security system, which has been creaking under the snowballing cost of supporting the fast ageing populations.
The four private-sector advisers at the 11-member CEFP pushed for a combination of flexible fiscal and bold monetary policies, to drive growth and wealth distribution.
Close communication between the government and the BOJ is particularly important in Japan, the world’s third largest economy, where economic management has for years relied on a mix of fiscal spending backed by ultra-low interest rates.
The relationship between the two has improved since BOJ Governor Haruhiko Kuroda took office in 2013.
At the meeting, Finance Minister Shunichi Suzuki’s advisory panel on fiscal policy urged sticking to the government’s elusive goal of achieving a primary budget surplus, excluding new bond sales and debt servicing, by fiscal 2025.
“As trade deficits may persist and market confidence in the yen is being called into question more than ever, the risk of losing trust is large if the fiscal reform target moves backward,” the panel said in a draft proposal.