EXCLUSIVE: IMF Exec Recommends Longer Fiscal Planning to Japan

By Adriana Reinecke Washington, Oct. 15 (Jiji Press)–International Monetary Fund executive Vitor Gaspar has recommended that Japan create longer-term fiscal plans amid increasing risks posed by interest rate rises. “After the pandemic, interest rates have been rising, debts have been rising, (and) the pressure of interest payments on budgets is increasing,” Gaspar, director of the IMF’s Fiscal Affairs Department, said in a recent interview with Jiji Press. The current debt trends and risks are “fundamentally different” from those of the prepandemic period, when ultralow interest rates were the norm, he said. In Japan, which accumulated debt under the ultralow interest rate environment, government debt has reached about 230 pct of gross domestic product, among the highest in the world. As the inflation rate has exceeded the Bank of Japan’s 2 pct target for three consecutive years, Gaspar said that the circumstances surrounding the country are “very different from the circumstances that prevailed in Japan in the last decade.” Given the country’s declining and aging population, “it’s important for the Japanese authorities to tackle that new environment,” he said. As public debts mount, Gaspar emphasized the need for countries around the world to reassess their fiscal policy management and promote more efficient government spending. Regarding Japan, he proposed “multiyear (fiscal) planning” that may extend over “very long projection periods.” In addition, “one could try to improve the targeting of energy subsidies,” he said, encouraging Japan to concentrate such measures on low-income households and financially vulnerable businesses. He also suggested that streamlining support for small and midsize enterprises “could help make room for high-quality public investment spending.” Gaspar, former Portuguese finance minister, will step down this month as director of the IMF department, a position he has held since 2014. END [Copyright The Jiji Press, Ltd.]