Japanese finance minister Katsunobu Kato speaks in Tokyo

Japanese finance minister Katsunobu Kato speaks in Tokyo

In a press conference held in Tokyo on July 2, 2025, Japanese Finance Minister Katsunobu Kato announced a series of measures aimed at curtailing public spending to address fiscal concerns. The minister highlighted the need to balance the government's budget and reduce the debt-to-GDP ratio.

Kato emphasized that the cuts will be implemented gradually over the next few years. The initial target for the fiscal year 2025-2026 is to reduce spending by 5%, with the goal of achieving a 10% reduction by 2027-2028 and a 15% reduction by 2028-2029. The minister stated that these cuts are necessary to fund new priority initiatives and maintain fiscal sustainability.

The announcement comes amidst a broader global trend of governments seeking to control public spending. Notably, Canada's Finance Minister François-Philippe Champagne has also requested cabinet colleagues to identify spending cuts to fund new initiatives and limit spending growth [2].

The Japanese government's move is expected to have a significant impact on the country's economy. According to data from the Ministry of Finance, government expenses excluding debt-financing costs account for 16% of Japan's gross domestic product (GDP) [1]. Reducing this proportion will be crucial for achieving fiscal stability.

The C.D. Howe Institute has warned that Canada's public finances are at a critical juncture, with potential average annual budget deficits of $86 billion over a four-year period [2]. While the specific context differs between Japan and Canada, the underlying fiscal pressures are similar, underscoring the need for governments to address public spending.

Kato's announcement is part of a broader effort to ensure that Japan's fiscal policies are sustainable and aligned with the country's long-term economic goals. The minister emphasized that these measures are necessary to create a more robust and resilient economy.

References:
[1] https://www.fsa.go.jp/en/conference/minister/2025/20250701.html
[2] https://www.marketscreener.com/news/latest/Canada-s-Finance-Minister-Asks-Cabinet-Colleagues-to-Identify-Spending-Cuts-Update-50450593/