Candidates vying for the presidency of Japan’s ruling Liberal Democratic Party (LDP) are increasingly advocating for increased government spending to stimulate economic growth and alleviate burdens on the public. One candidate has even proposed suspending tax hikes that were implemented to fund defense spending. However, few candidates have addressed the importance of fiscal discipline, despite the country’s severe fiscal situation. The debate on how to finance government measures remains shallow.
During a speech in Matsuyama, former economic security minister Takayuki Kobayashi expressed his intention to introduce a package of essential measures by year-end to combat rising prices and reduce social insurance premiums for young people. However, he has not provided details on how these measures will be funded.
LDP Secretary General Toshimitsu Motegi criticized the Finance Ministry for prioritizing fiscal discipline and burdening the public with implementing measures. He pledged to promote policies without tax hikes and called for suspending ¥1 trillion in increased taxes earmarked for defense capabilities and childcare support payments.
Motegi’s change in stance has drawn criticism since he was involved in creating these tax hike measures himself. He claims that higher-than-expected tax revenues resulting from economic growth will cover these expenses, but this plan’s feasibility is uncertain.
Former Environment Minister Shinjiro Koizumi argued during a debate event in Kanazawa that the government should not prioritize achieving a single-year primary budget balance at the expense of stifling economic growth. The government aims to achieve a surplus in its combined primary budget balance by fiscal 2025 but Koizumi’s proposal for a supplementary budget may complicate this goal if he wins the LDP leadership election.
Digital Minister Taro Kono emphasized fiscal discipline and criticized candidates who make promises without discussing funding during election campaigns. Japan’s national debt, including government bonds, has surpassed ¥1,300 trillion as of June-end due to rising interest rates.
The LDP presidential race highlights differing views on boosting government spending versus maintaining fiscal discipline amidst Japan’s challenging financial circumstances.
