The government will deploy "all possible tools" to ensure sustained wage growth as Japan is now on the cusp of finally breaking with deflation and entering a new stage, a draft of its annual economic and fiscal policy plan said Tuesday.
Under the draft blueprint, Japan aims for consistent economic growth of at least 1 percent even after 2030, when the country's population is projected to begin declining sharply.
It views the coming years until fiscal 2030 as a critical period for Japan, already one of the fastest-graying societies, to address labor shortages and boost its growth potential.
The government underscores the need for the heavily-indebted nation to restore its fiscal health, the worst among developed nations amid the prospect of more debt-servicing costs after the Bank of Japan raised interest rates for the first time in 17 years.
In the draft plan, the government maintained a goal of achieving a primary budget surplus -- a key indicator of fiscal health -- in fiscal 2025, with its attainment now in view. It vowed to reduce its outstanding debt in relation to the size of the economy.
The plan, presented at a meeting of the Council on Economic and Fiscal Policy on Tuesday, is expected to be finalized on June 21 after consultations with the ruling parties. The final version of the document will be used by the government to manage its economic and fiscal policy in the coming years.
The draft covers a range of policy priorities but is short on details as to how they will be achieved. Japan's potential growth rate is estimated to be around zero percent.
Still, the economy, which was shy of 600 trillion yen ($3.8 trillion) in the January-March quarter, can grow to 1,000 trillion yen in around 2040 in nominal terms, if proper policy measures are taken and stable 2 percent inflation is achieved, it added.
The blueprint comes at a time when the government sees Japan seizing a "golden opportunity" to make the transition from an economy still affected by the remnants of its years of experience with deflation to one in which a positive cycle of price and wage hikes and the momentum for growth is in place.
"In economic and fiscal policy management, it is of utmost importance to lead the Japanese economy to a new stage, from one that focused on cutting costs to one led by growth," it added.
Prime Minister Fumio Kishida has been calling for Japanese firms to raise wages as he prioritizes wealth redistribution. The government is seeking to keep the strong upward momentum seen in this year's annual wage negotiations between labor and management, which will be crucial for households hit by the rising cost of living.
In an apparent bid to ease public discontent with the way Kishida has handled the economy, the government began a 40,000 yen income and residence tax cut in June, though analysts see it as a temporary fix.
The latest document seeks to boost the hourly minimum wage, currently at around 1,000 yen, to 1,500 yen at an early date before its target of the mid-2030s, facilitate job-hopping and promote the reskilling of the workforce as ways to boost wages. To address labor shortages, it is also pushing for automation and digitalization.
