Japan's government is set to target annual real economic growth of more than 1% as part of a new long-term economic strategy, an ambitious goal that would more than double the country's average growth rate over the past five years, according to a draft policy document reviewed by Reuters.
The draft of Japan's basic policy framework for economic and fiscal management aims to achieve sustained real economic growth of more than 1% "as early as possible" while maintaining nominal growth above 3%, reflecting Prime Minister Sanae Takaichi's push to revive the economy through stronger domestic growth, Reuters reported.
Japan's economy has expanded at an average real annual rate of just 0.4% over the last five years, highlighting the scale of the government's growth ambitions.
According to Reuters, the blueprint calls for a decisive shift away from years of underinvestment by encouraging greater collaboration between the public and private sectors. Combined public and private investment is projected to exceed 370 trillion yen (about $2.29 trillion) through fiscal 2040, with a focus on strategic industries.
The government also plans to raise annual private-sector capital expenditure to around 230 trillion yen by fiscal 2040 while expanding the size of Japan's economy to nearly 1,100 trillion yen, the draft showed.
Alongside its growth agenda, the policy framework reiterates Japan's commitment to fiscal discipline. Reuters reported that the government intends to steadily reduce the debt-to-GDP ratio while pursuing economic expansion, treating the primary fiscal balance as a medium-term indicator to be managed in line with debt reduction goals.
On monetary policy, the draft underscores the importance of close coordination between the government and the Bank of Japan, citing legal provisions that call for policy alignment. According to Reuters, the document emphasizes that appropriate monetary policy will be crucial to achieving a strong economy, signalling the government's preference for maintaining low borrowing costs even as it could create tensions with the central bank over future policy decisions.
