Japan is preparing to formalize a long-term economic framework aimed at boosting annual real economic growth to exceed 1%. This target represents a significant shift from the recent average of 0.4%, supported by projected public and private investment reaching 370 trillion yen. The plan also emphasizes nominal growth above 3% and fiscal sustainability through gradual debt reduction.
The draft of the basic policy framework for economic and fiscal management, which was reviewed by Reuters, sets out a goal of securing sustained growth of more than 1% "as early as possible", alongside nominal growth above 3%, reflecting Prime Minister Sanae Takaichi’s drive to reflate growth.
The Cabinet Office did not immediately respond to a request for comment.
Japan’s average real growth rate over the last five years was 0.4%.
The draft outlines a break from a long-standing pattern of underinvestment, as the government seeks to work with the private sector to channel resources into strategic industries, with combined public and private investment projected to exceed 370 trillion yen ($2.29 trillion) through fiscal 2040.
The government aims to lift annual private-sector capital expenditure to around 230 trillion yen by the same fiscal year and grow gross domestic product to nearly 1,100 trillion yen, the document showed.
The draft also reiterates a commitment to fiscal sustainability, pledging to steadily reduce the debt-to-GDP ratio while balancing growth objectives. It positions the primary balance as an indicator to be managed over multiple years in a way consistent with debt reduction.
On monetary policy, the draft urges the Bank of Japan (BOJ) to align its decisions with Takaichi’s growth agenda, citing legal provisions requiring the central bank to coordinate policy with the government.
Appropriate monetary policy management is extremely important for achieving a strong economy, the draft said, signalling a preference for keeping borrowing costs low and setting up potential policy tensions with the central bank.
The government is expected to finalise the policy framework shortly. ($1 = 161.7600 yen)