Japan panel members urge multi-year budget framework for critical investments

By Makiko Yamazaki

TOKYO, April 13 (Reuters) - Private-sector members of Japan’s key economic advisory panel proposed a new multi-year budget framework on Monday to ensure stable funding for investments deemed critical to economic security.

The recommendations align with Prime Minister Sanae Takaichi’s push for "responsible proactive fiscal policy," which aims to bolster long-term growth while maintaining market confidence in Japan’s public finances.

The proposals to the Council on Economic and Fiscal Policy (CEFP) call for breaking with a long-standing practice of single-year budgeting and frequent use of supplementary budgets, saying they limit policy predictability and weaken long-term investment planning.

Key strategic investments, including those related to economic security, should be planned and funded over multiple years to ensure consistency and policy effectiveness, the four private-sector members said in a statement.

Fiscal management should also shift away from a single-year focus on the primary balance and adopt instead a central target of a sustained decline in the debt-to-GDP ratio, they added.

The CEFP oversees Japan’s fiscal blueprint and long-term economic policies.

Japan set itself the target of achieving a primary budget surplus by fiscal 2025, treating the primary balance as a key gauge of fiscal discipline showing how much policy spending can be financed without issuing new debt.

With debt at more than twice the size of its economy, analysts widely see Japan as needing to fix its tattered public finances.

But the debt-to-GDP ratio has fallen in recent years as inflation has driven nominal GDP and tax revenues, outpacing the growth in government spending.

Industries such as semiconductors and shipbuilding are among 17 the government has targeted for public-private investment efforts, although Monday’s statement did not name any specific industries.