Honebuto Focuses on Wage Hike

The Cabinet Office of Shiberu Ishiba administration submitted a draft of Basic Policy on Economic and Fiscal Management and Reform (Honebuto Plan) 2025 to the Council on Economic and Fiscal Policy on June 6th. The plan focuses on increasing income of families through wage hike, dismissing possibility of tax cut this year. Prime Minister Ishiba hopes his economic plan to appeal to the voters in the Upper House election in July. 

Honebuto Plan stipulates “basic stance of the government’s economic and fiscal management and direction of reforms,” issued in every summer. The policies included in the plan are supposed to be implemented in the next year’s budget formulation, which the government finalize in December. It is the first time for Ishiba to release Honebuto, since he took office in October 2024. Ishiba Cabinet is expected to decide Honebuto later this month.

 

Honebuto determines direction of economic policy in each administration every year. Honebuto 2024 by Fumio Kishida had a subtitle of “Realizing growth-oriented economy driven by wage increases and investments.” Former Prime Minister Shinzo Abe focused on overcoming COVID in Honebuto 2020, while his successor Yoshihide Suga stressed policies for green economy, digital, vibrant local community and overcoming low birthrate.

 

Ishiba mainly succeeds Kishida’s policies, raising “more wage hike than tax cuts.” There are demands from the opposition parties for lowering consumption tax rate, especially on foods, Ishiba has been negative for accepting them, arguing that discussing tax cuts without showing any fiscal resource would be irresponsible. The Honebuto draft embraces growth-oriented economy stemming from wage hike, which aims at sustainable growth of salary or income through expansion of Japanese economy. The plan sets a target at 1 percent of growth of real wage.

 

However, prolonged price inflation still imposes a great pressure on each household. The Honebuto draft recognizes hardship of families and entrepreneurs, mobilizing measures for adding costs on price or supporting business succession. Accumulating policies to support Japanese economy, the government postpones its target for primary budget surplus from FY2025 to “possibly earliest period between FY2025 and FY2026.”

 

Tariff policy of Donald Trump administration of the United States is a big concern for Japanese economy. Honebuto indicated that growing unpredictability in international relations would cause a paradigm shift in management of Japanese economy and fiscal policy, demanding a strategy to deal with new international order. It also noted a possibility that increasing settlements through Renminbi affects the status of U.S. dollar as the key currency.

 

Rising price of rice is another factor of instable Japanese economy. Ishiba hopes to include agricultural policy in Honebuto as his own development of economic policies. Honebuto 2025 is going to suggest broader trade of reserved rice, as well as fundamental revision of production control, expansion of exports and support for integrating rice fields.

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