Noted Foreign Economists Advise Japan to Improve Primary Balance

Tokyo, March 26 (Jiji Press)–Renowned foreign economists on Thursday proposed that the Japanese government achieve a primary budget balance within several years in light of rising interest rates or curb the deficit in the balance. The primary balance indicates to what extent the government can cover its policy costs with tax and other revenues without relying on debt issuance. Prime Minister Sanae Takaichi, who advocates a responsible and proactive fiscal policy, has abandoned the government’s target of bringing the primary balance into surplus on a single-year basis. At the day’s meeting of the Council on Economic and Fiscal Policy, chaired by the prime minister, Olivier Blanchard, former chief economist at the International Monetary Fund, said that the ratio of the Japanese government’s debt to the nation’s gross domestic product has declined because the economic growth rate has exceeded long-term interest rates. He called on the government to draw up a multiyear plan to improve the primary balance and further lower the debt-to-GDP ratio. Harvard University professor Kenneth Rogoff, who attended the meeting online, warned that Japan’s long-term interest rates may reach 3 pct within the next 10 years. A possible surge in interest rates will severely affect the country’s public finances and the flow of funds, he said, stressing the need for the government to reduce the deficit in the primary balance. As for Takaichi’s flagship policy of promoting crisis management and growth investments, Blanchard said that most necessary public investments will not fully generate future revenue. Meanwhile, Rogoff supported public- and private-sector investments in sectors in which Japan has strength, such as robotics and advanced manufacturing. At the start of the meeting, Takaichi said that she will incorporate Japan’s fiscal and economic management in international discussions. Blanchard said Japan, which is struggling to achieve its fiscal goals, should consider what kind of system is needed for the country in order to secure trust. END [Copyright The Jiji Press, Ltd.]