Japan's stimulus budget clears parliament

Members of the chamber were in the chamber on January 18, 2021 during the opening session of the lower house of parliament in Tokyo, Japan. KAZUHIRO NOGI AFP TOKYO - Japan's second supplementary stimulus budget for this fiscal year, which was 29 trillion yen $210 billion, cleared the lower house of parliament on Tuesday, paving the way for final approval in the upper chamber this week.

Prime Minister Fumio Kishida has a problem reconciling the various tasks of curbing national debt and spending his way out of the pandemic doldrums because of the budget, backed mostly by additional bond issuance.

The budget is unlikely to run into difficulties with the support of the ruling bloc in both chambers.

Japan is an exception when it comes to the global trend of ending crisis-mode fiscal stimulus, due to the national debt, the world's largest, being twice as big as annual economic output.

An advisory panel for Finance Minister Shunichi Suzuki said in its semi-annual recommendations that Japan's fiscal situation will become more severe ahead.

If confidence in fiscal management declines like Britain, that could affect the foreign exchange market and the government bond market. The panel of 16 experts from academia, media and business called for balancing the needs for responsible fiscal management and boosting defence capability earlier on Tuesday. It said that those issues would be a big issue for the regular annual budget for the coming fiscal year, which begins on April 1, 2023.

The recommendations to Suzuki form the basis for the drafting of the next annual budget.

The finance ministry prepares an annual budget each December, which goes to the cabinet for approval before going to parliament in January for debate and enactment by the end of March.

The recommendations to Suzuki form the basis for the drafting of the next annual budget.

The finance ministry prepares an annual budget each December, its proposal goes to the cabinet for approval before it goes to parliament in January for a debate and enactment by the end of March.

Kishida instructed defence and finance ministers to work together to increase defence spending's share of gross domestic product to 2 percent within five years, from about 1 percent now.

It was the first time that Kishida specified the size of defence spending.

Given Japan's tattered public finances, how to pay for more defence capability is a contentious issue between the defence ministry and the fiscal hawks of the finance ministry.

The panel stressed the importance of finding a stable way out, but did not demand any obvious alternatives: tax hikes, other spending cuts or more debt.

It asked those concerned to debate earnestly and gain an understanding from the public about how to share burdens. It didn't single out any specific funding sources.

Japan can't accept that the Bank of Japan's low rate policy is here to stay, according to the panel.

It is necessary to reduce annual bond issuance and rein in outstanding debt.