The government’s top priority for these “golden years” is dealing with rising prices fueled by a weak yen and the conflict in Ukraine driving up energy costs. Though Kishida’s Liberal Democratic Party won Sunday’s upper house election handily, opinion polling shows that voters believe the government has not done enough to tackle rising prices.
A new task force on prices and wages launching this week, led by Kishida, will use ¥5.5 trillion (US$40 billion) set aside under the latest supplementary budget for such steps as a reward points programme for consumers who save energy. But dealing with the problem at its root will likely require broader measures, such as investment in new supply chains.
The recent upswing in coronavirus cases is another urgent issue. The government plans to postpone a nationwide travel subsidy program that had been slated to start this month, amid reports of a seventh wave of infections in parts of the country.
Hospital and critical care bed occupancy rates remain low, however. If enough beds can be secured, the government might be able to avoid reimposing activity curbs and keep the economy running normally even if case counts rise.
“We will proceed cautiously in our transition back to normality,” Kishida told reporters yesterday.
Looking ahead to the rest of the fiscal year, energy and defence will be among the main challenges, testing Kishida’s leadership skills.
In the short term, concern about the risk of energy shortages may force Japan to fire up aging fossil-fuel power plants to avoid a crisis.
Also under this category is the LDP’s campaign promise to use nuclear energy to the greatest extent possible. Only 10 of the plants that were taken offline after the 2011 Fukushima Daiichi disaster have been returned to operation.
On the defence front, the government is set to revise key security documents this year. Kishida said the details will be considered as a set with the defence budget and funding.
Raising defence spending to 2% of gross domestic product from around 1% would represent an increase of around ¥6 trillion. Covering this through taxes alone would require the equivalent of a consumption tax increase of more than 2% points, while issuing debt instead would put a further strain on the nation’s finances.
The government plans to submit a nominee to parliament early next year to succeed Haruhiko Kuroda as governor of the Bank of Japan when his term ends in April. The change in leadership could spur the start of a pivot from years of ultraloose monetary policy.
Alongside all this, Kishida faces pressure from within his party to move forward with discussion of amending Japan’s pacifist constitution, as pro-revision lawmakers retained the necessary two-thirds majority in the upper house. But building a consensus will be tricky, as the parties that favour revision all differ on the details.
In the slightly longer term, social security and government finances also await Kishida in this three-year stretch — issues that could cause pain for the public and potentially affect the LDP leadership race in September 2024.
Social security reform is of particular concern to the prime minister. The baby boom generation starts turning 75 this fiscal year, and there are fears that medical and nursing costs will skyrocket and not enough personnel will be available to handle care for this growing older contingent.
The next five-year review of the public pension system is due in 2024. Because of the falling number of people due to demographic factors paying into the system, policymakers will need to craft a response against decreased basic pension payouts, as well as overhauls to the employee pension program.
The government’s goal of bringing the primary balances of the national and local budgets into the black is approaching the fiscal 2025 deadline. That represents a make-or-break date for Kishida, who has indicated that he will continue to raise the banner of fiscal health.
The next three years have been positioned as the time frame for executing Japan’s digital overhaul. These efforts will repeal or reform about 40,000 statutes and directives mandating written documents and face-to-face meetings. Japan has continued to play catch-up in digitalisation, despite the advantages to granted to productivity and competitiveness.