Political parties are promising to implement policy measures that will require more government spending in their respective campaign pledges for the Oct. 22 House of Representatives election.
The ruling coalition has declared that the administration would not use some of the revenue from the consumption tax increase from the current 8 percent to 10 percent, scheduled for October 2019, to repay state debts. Opposition parties have voiced objections to increasing the consumption tax rate.
Although the government is saddled with more than 1,000 trillion yen in debt, every political party has put the issue of restoring fiscal health on the back burner.
The Liberal Democratic Party (LDP) has not incorporated its goal of achieving a primary balance surplus by fiscal 2020, which the ruling party had pledged in the past, in its campaign pledge. A primary balance surplus means that the government can secure financial resources to cover the costs of social security and public works projects without borrowing money. Prime Minister Shinzo Abe has decided to divert part of the extra revenue from the consumption tax increase to finance the expenses of making education free of charge, although the consumption tax hike is designed mainly to help achieve a primary balance surplus.
"Amid the rapidly declining birth rate and aging of the population, we'll implement policy measures worth about 2 trillion yen to achieve drastic reforms," the prime minister said. However, if the government were to decrease its debt repayment, it would be tantamount to issuing deficit-covering bonds to help make up for a shortage of financial resources for its policy measures.
It was the prime minister who dissolved the lower house for a snap general election to ask the public if they support his government's policy measures to combat the declining birth rate and the aging of the population, which he calls a "national crisis."
If the prime minister is taking the problem seriously, he has a responsibility to secure the resources to finance countermeasures against the problem rather than leaving government debt to future generations.
Nevertheless, Prime Minister Abe has only said it will be difficult to achieve a primary balance surplus by fiscal 2020, and stopped short of showing a new goal. The ruling bloc has a responsibility to show a clear road map toward achieving fiscal health.
Opposition parties are even more ambiguous about how Japan should restore its fiscal health.
The Party of Hope, the Constitutional Democratic Party of Japan (CDP) and the Japanese Communist Party (JCP), among others, are insisting that education should be made free of charge, while demanding that the planned consumption tax increase be either postponed or called off.
The Party of Hope has pointed out that the government's previous goal of achieving a primary balance surplus by fiscal 2020 was unrealistic. The conservative opposition party says it would restore Japan's fiscal health by increasing tax revenue through the revitalization of the economy and reviewing government spending.
The party also incorporated the introduction of a basic income guarantee system and measures to reduce the burden of medical expenses in its campaign pledge, but these measures are nothing but pork-barreling. The party insists that the number of legislators be slashed, but such a measure would be far from enough to make up for a shortage of financial resources to cover snowballing social security expenses.
In 2012, the LDP, Komeito and the then ruling Democratic Party of Japan agreed to raise the consumption tax and determined the basic framework for government debt repayment in an effort to secure stable financial resources in preparation for the advent of an ultra-aging society. The three-party agreement was reached based on the principle that the issue was a challenge the nation faces and should not be made a political issue, but the accord has since been disregarded.
Interest rates on government bonds have been almost zero because of the Bank of Japan's ultra-easy monetary policy, as a result of which both the ruling and opposition parties have lost their sense of crisis over Japan's fiscal condition. Politicians have a responsibility to talk about the need to place extra financial burdens on taxpayers even though such measures would be highly unpopular with voters.