Japan plans to stick to annual budget policy next fiscal year, striving to eliminate inflation.

Japan plans to stick to its goal of achieving a primary budget surplus in the next fiscal year, according to a draft of its annual budget planning policy guidelines.

The draft also states that the government will continue efforts to reduce the debt-to-GDP ratio.

According to government projections in January, assuming continued strong economic growth and ongoing spending cut measures, the world's fourth-largest economy is expected to achieve a primary budget surplus in fiscal 2025.

Japan's primary budget balance (excluding new bond sales and debt servicing costs) has been in deficit for most of the post-war period, with the exception of the asset bubble period from 1986 to 1991.

As a result, Japan currently has the most severe public debt among industrialized nations, exceeding twice the size of its economy. Japan first set the goal of achieving a primary budget surplus in the early 2000s, but the target date has been postponed multiple times.

The draft notes, "Japan now faces an unprecedented opportunity to completely overcome deflation and achieve growth. We need to move forward to realize economic recovery and fiscal health."

However, the draft also mentions that achieving the primary budget surplus should not mean that the government is deprived of key policy options in certain economic situations.

The draft emphasizes that the government needs to work closely with the central bank and "flexibly" guide policy to achieve sustainable economic growth driven by private sector demand.

The draft also notes, "Monetary policy has entered a new phase," pointing out that the Bank of Japan ended eight years of negative interest rate policy in March.

The government draft will be submitted for review by ruling party lawmakers before the cabinet meeting on June 21.