Japan's Kishida Unveils Policy Proposal Before Potential Polls

Japan’s Kishida Unveils Policy Proposal Before Potential Polls

Time Stamp: June 8, 2023 12:00 AM
Source Node: 2708023

Japanese Prime Minister Fumio Kishida proposed a long list of policy targets for 2023 in different areas where Japan is facing challenges, from childcare and supply chains to the greening of its economy.

The government’s fiscal plan didn’t include any figures on the total cost of the suggested policies, or how they will be funded, leaving the question of how these goals will be achieved unanswered, added to speculation over Kishida potentially calling an early election.

While the funding source remains unclear, the plan may still help maintain Kishida’s recovering approval ratings as speculation swirls that he may call an election sometime soon.

“We want to solve social issues, and by doing so, create new growth engines, and build a more sustainable and inclusive society,” said Kishida.

The proposal is expected to be approved by the cabinet in the middle of June 2023.

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“It would be best for Kishida to call a snap election around the fall of 2023 when he can start discussions over an additional budget in the extraordinary diet session,” said Toru Suehiro, chief economist at Daiwa Securities. “If Kishida dissolves parliament during June 2023, he can only present the qualitative information in the fiscal policy plan.”

Continuing from 2022, the government also stated its goal of seeking fiscal health, although it didn’t mention its target of achieving primary balance by the year ending March 2026 for the second year in a row. Economy Minister Shigeyuki Goto told reporters that the goal still remains, despite it not being written out in the policy plan.

The government also said the economy is getting back to normal from the pandemic, suggesting that public funds will be used more for Kishida’s new policy wish list rather than COVID-19 relief.

2023’s policy proposal also reiterated the Bank of Japan’s goal of achieving sustainable 2% inflation while adding a clause on the need for wage gains, suggesting that the government remains in lockstep with the central bank’s policy guidance.

Childcare Policy

The most significant of the new additions in 2023 is an expansion of support for childcare in order to stop the country’s accelerating population decline. An earlier version of the draft obtained by Bloomberg June 7 showed that the childcare policy details were still being debated, likely reflecting the level of contention surrounding the policies.

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The latest draft showed the government intends to put together a plan for the next five years by the end of 2023 to put children at the center of society. It also said it will support investments in small and medium firms, given that job opportunities and wage levels are the biggest reason behind the decline in the number of children being born.

During the week of May 31, Kishida announced that the government would spend around ¥3.5 trillion ($25.1 billion) on policies meant to bolster its diminishing birthrate. Kishida has warned the country’s population crisis threatens to undermine its ability to function as a society.

Supply Chain

The draft showed Kishida also hopes to promote supply chain reform. June 7’s proposal suggested that Japan aims to become the “core” of the global supply chain for critical materials including next-generation semiconductors through further investment in chips and other products.

Labor Market Reform

Another of Kishida’s policies reflected in the latest proposals is labor market reform, which is intended to increase job mobility and raise wages.

Proposed changes include supporting workers who want to gain new skills and relaxing the unemployment benefit system for those who leave their jobs for personal reasons, potentially enabling a smoother flow of workers into growth industries. Another is a review of existing retirement benefit systems, making it easier for people to change jobs.

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The government announced June 6 its revamped chip strategy to triple sales of domestically produced semiconductors by 2030. The plan looks to strengthen efforts to develop and deliver cutting-edge semiconductors that are critical for economic security measures and advanced technology like generative AI.

Green Transformation

June 7’s proposal also stated a plan to lure foreign funds for its energy transition, part of Kishida’s push for his “green transformation” vision to address climate change and economic growth. The draft said it aims to strengthen Japan’s role as a global financial hub for energy transition investments in Asia.

Earlier in 2023, the cabinet approved the nation’s basic plan for tackling climate change, including a subsidy program to promote energy efficiency and an extension of the lifespan of existing nuclear reactors. It has also been looking to sell a new type of sovereign debt to raise the 20 trillion yen needed for decarbonization.

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