While the budget for the coming fiscal year foresees record spending, expenditure will only rise marginally and revenues may climb even faster. The upshot is that the government is set to proceed with fiscal tightening. While there is no pressing need to do so, continued austerity provides a buffer against the inevitable widening of the budget deficit during the next economic downturn. But it also implies that the Bank of Japan will have to keep policy loose for longer.
Become a client to read more
This is premium content that requires an active Capital Economics subscription to view.
Already have an account?
You may already have access to this premium content as part of a paid subscription.
Sign in to read the content in full or get details of how you can access it
Register for free
Sign up for a free account to gain:
- Unlock additional content
- Register for Capital Economics events
- Receive email updates and economist-curated newsletters
- Request a free trial of our services