IMF Warns Of Japan's Worsening Fiscal Deficit Under Minority Government

The International Monetary Fund (IMF) on Friday warned of a further deterioration in Japan's fiscal health under Prime Minister Shigeru Ishiba's minority government as it faces policy demands from opposition parties, Kyodo News reported.

Japan's public debt is likely to remain high, driven by rising interest payments and ballooning social security costs due to a rapidly aging population.

Noting that Japan's fiscal deficit is projected to rise slightly this year due to additional spending on defense and child-related policies, the IMF stated, "Any expansionary measure should be offset by higher revenues or expenditure savings elsewhere in the budget."

The warning comes as the government seeks to pass a record 115.54 trillion yen ($760 billion) state budget for the next fiscal year, starting in April. The amount could rise further amid opposition calls for increased spending on education and other issues.

Ishiba has pledged to build a cross-party consensus through parliamentary debate to pass the budget. His ruling Liberal Democratic Party and its junior coalition partner, Komeito, lost their House of Representatives majority in October's general election.

Japan's fiscal health is the weakest among advanced economies, with its total debt exceeding twice the size of its economy.

The IMF stated that Japan's public debt is likely to remain high, driven by rising interest payments and ballooning social security costs due to a rapidly aging population, Mainichi Shimbun also reported.