Kishida Pledges 'Exit from Deflation' as FY 2024 Budget is Approved

Japanese Prime Minister Fumio Kishida pledged new economic measures in a press conference on March 28, saying that he sees it as "the duty of the administration to bring the country out of deflation." 

His intent, he says, is that the new measures will ensure incomes rise above inflation. He added, "We will implement important measures at full speed, including those to cope with the earthquake disaster," said Kishida.

Earlier in the same day the Japanese Diet enacted Japan's budget for the new fiscal year starting in April 2024. 

The new fiscal year budget is the second largest ever. It totals a general account of ¥112.5717 trillion JPY (approximately $743 billion USD), exceeding ¥110 trillion ($727 billion) for the second consecutive year.

Measures to Address Deflation

Mapping out various measures to address deflation, Kishida said confidently. "We have capital investment at a record high level, and a series of large-scale strategic investments from overseas. We are at the most crucial  moment in history to change the course of the economy."

For example, he explained that there will be funds in the budget to encourage investment in the small and medium enterprises that comprise about 70% of the economy. This measure is further designed to address the workforce crunch faced in many sectors. 

Kishida also welcomed the increases in wages at large companies this spring. According to local reports, calculations by Japan's largest labor union put the preliminary average figures for wage hikes at a 33-year high of 5.28%. He then appealed to the public and private sectors to work together to establish a positive mindset throughout society that higher wages [for all] are a matter of urgency.

An income tax cut is another measure that will be implemented from June of this year, said the Prime Minister, and it is expected to be approximately ¥ 40,000 (approximately $264 USD)

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In addition Kishida pledged investment in growth sectors such as green transformation and energy. He made it clear he wants to weed Japan away from high-cost foreign energy. 

Adding a note on the Bank of Japan announcement of a major shift in its interest rate policy, Kishida summed up the overall significance of these initiatives: "These are all measures that are key at this point in history, when we are trying to leave the road of deflation and grow the economy." 

Addressing the Political Party Funds Scandal

Since January, the Liberal Democratic Party has been embroiled in a fundraising scandal. Several factions have been accused of not fully reporting money received from fundraising events. Some reports suggest the cash was redirected to slush funds. At this time, an ethics committee is investigating whether several party members were involved in wrongdoing. 

Kishida said that he couldn't comment on the specifics of the interviews that were still ongoing. However, if wrongdoing is found, he stated that it was possible "strict punishments could be meted out in the coming weeks."

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Author: Arielle Busetto