The government has revised the draft Basic Policy and unveiled plans to invest more than ¥370 trillion in strategic areas such as AI and semiconductors. At the same time, fiscal sustainability and social security reform have emerged as key issues, and market concerns have not been fully dispelled.
The Nishinippon Shimbun editorial reports on the intense scrutiny from financial markets of Japan’s economic and fiscal policies. The government has identified winning market confidence in the fiscal 2027 budget process as essential and revised the draft Basic Policy.
The draft placed emphasis on growth and outlined a policy of investing more than ¥370 trillion in strategic areas such as AI and semiconductors through combined public- and private-sector investment. This prompted market concerns about the approach and the supporting sources of funding.
Concerns over fiscal sustainability have intensified. With current social security-related spending accounting for one-third of the government budget, views have emerged that reform is needed on both the benefits and contributions sides. A review of out-of-pocket medical expenses did not result in a concrete proposal, while caution prevailed over raising the burden on individuals.
The editorial also addressed the Bank of Japan’s monetary policy management. The government revised language concerning the Bank’s independence, but market concerns have not been fully resolved. Yen-buying intervention by the Japanese and US governments brought the yen and long-term interest rates under control for the time being, but calls mounted for continued policy action in connection with the intervention.