The government is considering issuing bridge bonds as early as fiscal 2024 to make up for an expected shortfall in funding to boost child-rearing support, a key policy goal of Prime Minister Fumio Kishida, sources with knowledge of the plan said Wednesday.
Bridge bonds are the same as deficit-covering bonds but the government specifies in advance the funding source to repay them. For the envisaged issuance of childcare bonds, likely spanning over two years, the government is expected to use increased social insurance contributions, the sources said.
Kishida sees the country's falling birthrate as a national crisis that requires "unparalleled" child-rearing support, and his government is considering doubling the child policy-related budget in the early 2030s.
Earlier this week, the prime minister ruled out raising taxes to enhance childcare support.
He decided last year to go ahead with corporate, income and tobacco taxes to cover part of the 43 trillion yen ($310 billion) defense budget planned for the next five years. The exact timing of the hikes remains unclear.
The government estimates that an additional 3 trillion yen a year will be needed to tackle the falling birthrate in Japan.
About a third of the amount will be covered by social insurance premiums, and the rest by curbing social security spending and increasing corporate contributions that are currently used to provide child-rearing support, the sources said.
While raising social insurance premiums is seen as a viable option, it will unlikely come until fiscal 2026 at the earliest, the sources said, meaning that the government would need to rely on government bonds if it wants to boost spending on childcare support during that time.
The government is planning to manage revenue from the issuance of bridge bonds in a special account to be set up in the state budget, the sources said.
The number of newborns in Japan slipped below 800,000 in 2022 for the first time since comparable data became available in 1899, due to multiple factors such as more people choosing to get married later in life than before and an increase in double-income households.