Japan's ministers see economy picking up, stick to FY2025 budget-balance target

[TOKYO] Japan's main economic ministers were cautiously optimistic on Monday that the world's third-largest economy is picking up from the Covid-induced slump thanks to stimulus spending, though the situation is severe with downside risks.

Addressing the opening session of parliament, Economy Minister Yasutoshi Nishimura said Japan's economy would grow 4 per cent in real term and 4.4 per cent in nominal term in the coming fiscal year, bringing gross domestic product back to pre-pandemic levels.

The projections appeared rosier than private-sector analysts' estimates, and the recent declaration of a state of emergency in Tokyo, the capital, and 10 other major regions raised the spectre of a double-dip recession this year.

"We will do the utmost to defeat deflation and revive the economy to meet the projections," Mr Nishimura said in a speech.

With the industrial world's heaviest public debt in mind, the ministers told parliament that they would strive to revive the economy and restore public finances simultaneously, while putting making coronavirus response a top priority.

"We will strive to achieve both economic revival and fiscal reform in order to bring the primary budget balance to a surplus in fiscal 2025," Finance Minister Taro Aso told parliament.

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The primary budget, which excludes new bond sales and debt servicing costs, serves as a key gauge of fiscal health, but the coronavirus stimulus spending made the target even more elusive.

Japan has deployed a combined US$3 trillion in economic packages to combat the health and economic crisis, with annual government bond issuance at an all-time high of 236 trillion yen (S$3 trillion).

Japan is saddled with a public debt burden at more than twice the size of its US$5 trillion economy, by far the largest among industrial nations due to years of massive stimulus and the snowballing costs of supporting its fast-ageing population.

REUTERS