TOKYO, May 31 (Reuters) – Japan on Tuesday scrapped a timetable to balance its primary budget in a draft mid-year economic policy roadmap, in an apparent move to meet growing calls for stimulus spending to revive the economy affected by the pandemic.

The mid-year draft is Prime Minister Fumio Kishida’s first since taking office in October. Another key Kishida government council separately called for measures to get households to put more money into investments rather than deposits.

Kishida’s government made no explicit mention of the target year for balancing the primary budget in the economic policy roadmap, which will be approved by his cabinet next week.

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Instead, the draft advocated a necessary revision of the budget target depending on the situation.

The government has previously pledged to achieve a primary fiscal surplus, which excludes new bond sales and debt service charges, by the end of fiscal year 2025. The balanced budget target has served as a key indicator for the government to fund political spending without relying on debt.

The lack of a target year in the policy plan could raise questions about Japan’s determination to fix its tattered public finances.

“The description of the review may pave the way for a postponement of the target,” said Takahide Kiuchi, a former board member of the Bank of Japan who is now an executive economist at the Nomura Research Institute.

TAX REFORM

The move would buck a global trend of normalizing crisis-mode stimulus, including in the Group of Seven (G7) advanced economies, making Japan an exception and underscoring the challenge of containing the burden. of the heaviest debt in the industrial world.

“We will not abandon the flag of tax reform and will attack the previous tax reform goal,” the draft says. “However, we need to closely monitor the economic situation at home and abroad, including the impact of infections and price hikes.”

The draft called for a “two-step approach” to deal with uncertainty over soaring oil and other prices, signaling a willingness to adopt other economic measures following the first supplementary budget of worth 2.7 trillion yen ($21.1 billion) for this fiscal year, approved by parliament into law on Tuesday.

“We expect the Bank of Japan to achieve its price stability target of 2% in a sustainable and stable manner, depending on the economy, prices and financial conditions,” the draft said.

Also on Tuesday, Kishida’s flagship council for shifting to an improved version of capitalism and redistributing wealth to households called in a draft of its first action plan to consider revamping an equity investment program and in tax-exempt funds.

With this plan, the government hopes to get households to invest more of their roughly 2 quadrillion yen in financial assets instead of holding them in deposits.

Cash and deposits account for more than half of total household financial assets, according to the project.

($1 = 127.7400 yen)

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Reporting by Tetsushi Kajimoto and Daniel Leussink; Editing by Jacqueline Wong and David Holmes

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