With fiscal stimulus Japan is going fix its weakened public finances.

A new budget guidelines dropped a reference to the need for “reviewing spending without sanctuary”, which had been inserted in recent years as a pledge to stick to fiscal discipline.

We will deploy necessary fiscal spending without hesitation in response to crisis and take all possible measures to defeat deflation, the author of the draft emphasised. We must not put the order wrong. We will restore the economy and then tackle fiscal reform, he added.

Unlike many other countries, Japan’s economy has not rebounded strongly from last year’s pandemic-induced slump. It contracted much faster than expected in the third quarter as global supply disruptions hit exports and business spending, while new pandemic cases soured consumers’ mood.

The guidelines are expected to be approved by Prime Minister Fumio Kishida’s cabinet later this month. They will provide the basis for the next fiscal year’s budget to be compiled later this month.

The draft guidelines were approved on Friday by the ruling Liberal Democratic Party after having been watered down amid persistent pressure from within the party to boost fiscal stimulus ahead of upper house elections next summer.

The fiscal 2022 budget will be coupled with this year’s extra budget with a record spending of 36 trillion yen that is about US $318 billion to ensure seamless spending over 16 months to cushion the blow from the pandemic.