Japan’s latest economic road map focuses on investment in human resources, retains fiscal goal

9 Jun


The government endorsed a plan Friday to prioritize investment in human resource development to buttress Japan’s economic growth and improve its tattered finances.

Japan will maintain its pledge to achieve a surplus in the primary balance by fiscal 2020, while the government’s annual economic policy blueprint said that another indicator used to gauge fiscal health — the debt to gross domestic product ratio — is also important.

Ballooning social security costs have made it imperative to rein in spending as the graying of its population picks up pace.

One key step on the agenda is to make preschool education free, although questions remain over how to fund such a policy. The blueprint only states that a decision should be reached by the end of the year.

With a public debt twice the size of its GDP, Japan’s fiscal health is already the worst of the major economies.

The debt-to-GDP ratio is affected by economic growth and long-term interest rates. It improves when the economy grows and interest rates are low.

Economists view the emphasizing of the new barometer as laying the groundwork for more fiscal spending in the future, since the goal of turning the primary balance deficit into a surplus by fiscal 2020 appears unattainable, based on recent projections.

Since the policy road map does not refer to the sales tax hike to 10 percent planned for October 2019, this has triggered speculation that it could be delayed again.

But Cabinet ministers and government officials alike dismissed the idea, saying Japan would go ahead with the hike as scheduled.

The Cabinet approved the economic and fiscal policy and a strategy for future investment on Friday ahead of the compilation later this year of the budget for fiscal 2018.

“We will carry out labor reform to change how people work and also boost productivity by investing in human resources,” Prime Minister Shinzo Abe told a joint meeting of government panels that finalized the documents.

“The employment situation has been significantly improving and wage growth is continuing,” the prime minister said as he expressed hope the claimed momentum would accelerate.

Japan’s economy has enjoyed modest growth in recent quarters, marking the longest expansion since 2006. But it still lacks the vigor needed to put an end to chronic deflation and is grappling with a severe labor shortage.

The government plans to prepare legislation to impose a cap on overtime work and to eliminate discrimination between regular and nonregular workers.

Spurring innovation is another priority because the strategy for future investment sets out a goal to create a smart society where advanced technology such as self-driving vehicles and artificial intelligence is supposed to help solve social issues.

In the face of a severe labor shortage in the logistics industry, the strategy envisages the use of partially automated truck convoys to transport cargo and small drones to deliver goods.

It also calls for big data and AI to be incorporated in providing medical and nursing care services, and for robots to be used to assist elderly people.

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