Japan said Wednesday it will trim its crisis-mode spending amid the COVID-19 pandemic and the war in Ukraine to normal levels, while pledging to achieve economic growth accompanied by wage hikes as part of Prime Minister Fumio Kishida's drive to accelerate wealth redistribution.

The draft economic and fiscal policy blueprint for fiscal 2023 came as the debt-ridden nation plans to boost spending on defense and child care support in the years ahead, with specifics on how to fund it yet to be finalized.

While a reference to its increasingly elusive goal of turning a primary balance surplus in fiscal 2025 was omitted again, the document states the government will work to restore fiscal health. In fiscal 2024, it will check on the progress of economic and fiscal reform, reviewing how the country's fiscal rehabilitation should proceed.

The second draft blueprint under Kishida was presented Wednesday to a government panel meeting.

Japanese Prime Minister Fumio Kishida (C) speaks at the government's Council on Economic and Fiscal Policy meeting at the premier's office in Tokyo on June 7, 2023. (Kyodo) ==Kyodo

It underscores the need for pay hikes in creating a "virtuous cycle" of economic growth and wealth redistribution at a time when a growing number of firms are raising pay to keep pace with accelerating inflation.

The draft plan calls for more investment in human resources development and labor market reform to keep the momentum going for more companies to offer higher pay.

The blueprint said the reskilling of workers and facilitating job-hopping in search of better employment conditions are important as lifetime employment and seniority-based systems in corporate Japan have been partly blamed for limiting wage growth.

The government compiles a basic policy on economic and fiscal management and reform every year. This year's draft document still needs to be formally approved by the Cabinet after consultations with the ruling coalition of the Liberal Democratic Party and Komeito.

Despite its debt being more than twice the size of the economy, the government has ramped up spending to help struggling Japanese households cope with the negative impacts of the COVID-19 pandemic and Russia's war on Ukraine that sent energy prices surging to the detriment of the resource-scarce nation.

Kishida has unveiled plans for Japan to spend a total of 43 trillion yen ($308 billion) for the five years until fiscal 2027 to better respond to threats posed by an assertive China, nuclear-armed North Korea and Russia.

Japan is considering setting aside around 3.5 trillion yen annually to expand child care support for the next three years to fiscal 2026, with an eye to eventually doubling child policy-related spending from the current level in the early 2030s.

The top priority will go to spending reform in areas other than defense and child policy, the prime minister has said.

Japan's goal of turning a surplus in the primary balance, or tax revenues minus spending except for debt-servicing costs, is still far off, given the government's projections showing it will return to the black in fiscal 2026 at the earliest.

The draft document reiterated that the fiscal rehabilitation target should not limit "macroeconomic policy options," and it will respond "with agility" to changes in economic and inflation conditions.

"We expect the Bank of Japan to achieve its price stability target of 2 percent in a sustainable and stable manner in view of economic, price and financial conditions, accompanied by wage increases," the document said, adding a reference to pay for the first time.

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