Japan to adopt stricter fiscal management rules: Report

Japan will put in place stricter fiscal management rules to place a cap on budgets. The rules will also require permanent funding sources for new policy steps in a fiscal reform strategy due out this month, according to a Nikkei report dated today.

The government would also pledge in the plan to do whatever possible to ensure that new bond issuance in the year to March 2012 would not exceed the record $480 billion earmarked for this year, according to the report. It would also not mention any bond issuance cap for other years.

The Japanese government plans to spell out the medium- and long-term fiscal targets before a G20 summit in Toronto next week.

Ratings agencies have threatened to cut the country's sovereign debt rating unless it prepared a credible plan to curb the huge public debt, which currently stands at nearly twice the size of Japan's GDP.

Meanwhile, Japan's new prime minister, Naoto Kan, known as a fiscal conservative, has warned of default on the country's borrowings if it failed to curb debt. He has said that fixing the country's finances was the biggest issue the government faced.

He said the fiscal reform plan would include as one of its goals, bringing Japan's primary budget balance -- the balance excluding revenue from bond sales and debt-servicing costs -- into the black in a decade.