Statement by Mutsuo Iwai, Acting Chairperson of Keizai Doyukai on FY2026 Government Budget Draft

December 26, 2025

Mutsuo Iwai
Acting Chairperson, Keizai Doyukai

The Cabinet has approved today a government budget draft for fiscal 2026.
We hereby present our expectations and requests to the government. At the same time, we believe that business leaders have a responsibility and a role to make effective use of the government's proactive fiscal policy to drive economic growth. In this regard, we are committed to making a concerted effort to address the various challenges we face, including corporate transformation.

1. In the initial budget draft, the general account total expenditure and national debt service have both reached record highs. While we understand this within the framework of the government's economic and fiscal management policy under "responsible and proactive public finances," concerns remain that fiscal discipline is being weakened. During the upcoming parliamentary sessions, we hope that the ruling and opposition parties will engage head-on in bipartisan deliberations on sustainable national finances.
2. Social security expenditure is also at a record high. A reform for building a sustainable social security system is still not sufficient enough, as evidenced by the postponement of delisting OTCequivalent drugs from insurance coverage in the latest revision of medical service fees. We hope that the forthcoming national council of bipartisan lawmakers will be a big step forward for discussions toward a drastic reform. Keizai Doyukai will swiftly explore an optimal balance between benefits and contributions in medical system reforms and will actively communicate its proposals.
3. In the near future, the government is expected to place on the agenda a reform of the primary balance assessment system, shifting the current annual assessment to a multi-year evaluation framework. We are concerned that such a change will further weaken fiscal discipline, given that the target year for achieving a primary surplus has repeatedly been postponed even under the existing annual assessment system. With social security benefits set to rise due to the aging population, it is essential to maintain market confidence amid the severe conditions of the world's highest public debt-to-GDP ratio and rising interest rates. In this regard, we urge the government to present a path toward fiscal consolidation by establishing a framework that consistently prioritizes the achievement of a primary surplus.
4. Keizai Doyukai has long pointed out the limitations of single-year budgeting and has advocated a multi-year, project-based framework. We welcome the government's stance in the budget draft, which allows for institutional design from a multi-year perspective. We look forward to improvements in the quality of government spending through the thorough implementation of EBPM (evidence-based policymaking) and a reallocation of budget resources to initiatives with higher multiplier effects from a medium- to long-term perspective.

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