Japan's new government will unveil a strategy to fix its tattered finances by June 22, the national strategy minister said today, in an effort to reassure investors that it will cut back the country's massive debts.
Prime Minister Naoto Kan says the debt is the "biggest issue that the country must tackle" and the country risks a default if it fails to deal with it.
The strategy will consist of a medium-term fiscal plan that includes binding caps on spending for the state budget over the next three years, plus a set of longer-term targets to bring the primary balance into surplus.
One aim will be to reduce the ratio of outstanding public debt to GDP, which at around 200 per cent is the biggest in the developed world.
The government needs to lay out a credible plan to keep the support of investors longer term and avoid a credit ratings downgrade. Investors are already expressing concerns about Japan's fiscal outlook through the credit default swaps market.
The government has projected a primary deficit, the budget balance excluding revenue from bond sales and debt servicing costs, of 33.5 trillion yen (€302 billion) for the current fiscal year that started on April 1.
REUTERS