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Japan government advisers lay groundwork for more welfare spending

Japan government advisers lay groundwork for more welfare spending
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TOKYO (Reuters) – Japanese government advisers laid the groundwork on Monday for substantial gains in welfare spending in the budget for the next fiscal year to subsidise education and childcare costs.

Influential members of the government’s top advisory panel, when submitting policy recommendations at a meeting, omitted mention of a cap on welfare spending that has been in place for the past three years.

The members are four academics whose thinking on policy is considered close to that of Japanese Prime Minister Shinzo Abe, so there is strong chance that their recommendations will be adopted when the government issues fiscal policy guidelines in June. The next fiscal year begins April 2019.

Welfare spending already accounts for around 21 percent of gross domestic product due to Japan’s rapidly ageing society. Some economists worry that such spending will spiral out of control if the government abandons the cap on welfare spending.

Japan’s outstanding public debt burden is the worst in the world at more than twice the size of its economy.

Government bond yields have remained low due to the Bank of Japan’s quantitative easing, but these could spike if investors grow worried about fiscal spending.

Since taking office in late 2012, Abe has made some progress in improving Japan’s fiscal position by raising tax revenue and reducing issuance of new debt.

Still, many economists worry this is not enough to control the debt burden.

The government will face pressure to increase spending for two of Abe’s signature policies: subsidised education and child care for low- and middle-income households.

(Reporting by Stanley White; Editing by Richard Borsuk)

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