JRI Research Journal;Vol.9 No.1,
Fiscal Discipline: The Prerequisite for “Responsible and Proactive Fiscal Policy” ― Budgetary Reform, New Consolidation Indicators, and Strengthening Oversight Functions ―
Katsuhiro Hachiya
Takuto Murase
Summary
The Fiscal Landscape:The General Account Initial Budget for Fiscal Year (FY) 2026 has reached ¥122 trillion. While new government bond issuance has been maintained below the ¥30 trillion threshold for the second consecutive year, recent trends offer no guarantee against substantial mid-year expansions via Supplementary Budgets. The accelerating rise in interest rates is a clear manifestation of market vigilance regarding Japan’s fiscal management.
The Foundation of Market Confidence:Maintaining market confidence is paramount. Demonstrating a steadfast commitment to Fiscal Consolidation is the baseline for national crisis management. The transition from "excessive austerity" to a "Responsible and Proactive Fiscal Policy" paradoxically demands even more rigorous fiscal discipline.
Key Proposals:
(1) Budgetary Reform
Establish multi-year investment plans for 17 priority areas, prioritizing projects based on maturity and securing dedicated "slots" in the Initial Budget. This will enhance predictability and limit Supplementary Budgets to genuine, unforeseen global shocks or disasters.
(2) Expenditure Reform
Conduct a thorough review of Special Taxation Measures and subsidies, eliminating those with low efficacy. Leverage regulatory and administrative reform to curb spending growth while protecting essential services.
(3) Strengthening Credibility
Set a hard ceiling on the total volume of new debt issuance through FY2030 as a new consolidation metric. Establish an Independent Fiscal Institution (IFI), ensuring its independence by requiring Diet approval for its leadership.