Sep 26, 2017 (Japan Today) - When it comes to fiscal reconstruction, Japan has a history of failing to deliver on its promises, largely because of economic turmoil originating abroad.
This time, it is Prime Minister Shinzo Abe's move to increase spending on education and child care that has forced the prime minister to effectively give up Japan's fiscal 2020 target for achieving a primary budget surplus -- an international commitment.
"Achieving a primary budget surplus in fiscal 2020 will be difficult," Abe told a press conference as he unveiled his plan to spend 2 trillion yen ($18 billion) to foster human resources and improve productivity in aging Japan.
While the goal of attaining a surplus in itself will be maintained, the latest development is feared to set the stage for more spending as Japan grapples with security threats from North Korea and steps up preparations for the 2020 Tokyo Olympics and Paralympics.
It will also likely put the Bank of Japan -- holding around 40 percent of outstanding Japanese government bonds under its asset- buying scheme -- in an even more difficult position when the central bank explores an exit strategy, according to analysts and economists.
"Japan is crossing a red line," said Hideo Kumano, chief economist at the Dai-ichi Life Research Institute.
"I'm not sure whether 2 trillion yen can solve what Mr. Abe described as the 'national crisis' (of Japan's aging population with a declining birthrate). What's certain is that it won't help fiscal reconstruction, which is a crisis," Kumano added.
In the wake of sagging approval ratings for his Cabinet at one point, Abe is seeking voters' backing for his plan to spend part of the revenues from a planned consumption tax hike in 2019 to ease the financial burdens of preschool and higher education as well as day care services for children.
This, however, would reduce the funds intended for restoring fiscal health, the worst among major developed economies.
Education is one of the main agenda items for a government panel launched this month to discuss ways to foster human resources in the country's graying society.
Since talk of free education emerged, multiple funding options have been floated such as the creation of a "child insurance" system and education bonds. Finance Minister Taro Aso has opposed the idea of education bonds because future generations need to pay back debts.
