Japan Prime Minister Sanae Takaichi, who is backing a "proactive fiscal policy," has announced plans to compile a new economic package. The market, expecting an economic boost from a large-scale budget, has pushed the Nikkei Stock Average up close to the 50,000 mark.

Financial administration focused solely on lavish spending runs the risk of spurring inflation and saddling future generations with massive debt. Such an approach offers no clear path toward rebuilding the lives of the public.

On the ground, however, there has been no end to price increases, especially for food items including rice. In a government survey conducted this year, the proportion of respondents who said they were "dissatisfied with their dietary lifestyle" climbed to nearly 40%, the highest level since the survey began in 2008.

It is natural to quickly press ahead with countermeasures, but it is low-income earners who have been hit the hardest. Support should be targeted at these individuals.

A major concern is that large-scale measures could overstimulate consumption and further drive up prices.

Concerns over 'new Abenomics'

Among the policies that Prime Minister Takaichi has expressed a desire to carry out, there are a series of measures that could be described as a little more than handouts. The abolition of Japan's provisional gasoline tax and income tax reductions through raising the so-called "annual income barrier" -- the threshold beyond which workers become liable for social insurance premiums -- would also benefit high-income earners as well. There are plans as well to significantly expand grants that local governments can use freely.

It should not be overlooked that the prime minister has sought to restrain the Bank of Japan from raising interest rates in the past. During last year's Liberal Democratic Party (LDP) presidential election, she criticized rate hikes as "foolish," and also recently stated, "The government is responsible for setting the direction of monetary policy." If low interest rates persist, the yen will weaken further, spurring inflation.

The policy built on proactive fiscal measures and monetary easing has been referred to as "new Abenomics," after the economic policy mix modeled by the late former Prime Minister Shinzo Abe. However, back in 2012, when the Abe administration was inaugurated, overcoming deflation was a major challenge. The current economic situation is completely different.

The prime minister is prepared to issue additional government bonds. But unlike during the Abenomics era, when the Bank of Japan kept interest rates low, rates are now rising, increasing debt.

To begin with, the prime minister lacks a sense of crisis about the dire state of public finances. Japan's outstanding debt now stands at over 200% of GDP, the worst among advanced economies. The prime minister has claimed, "If you consider the government's financial assets, the ratio is in the 80% range." She likely means that financial assets could be sold to repay debt. These assets, however, include many stocks that are used to manage Japan's pension reserve fund, making them difficult to sell. If the government is trying to make the situation appear better than it is to justify fiscal spending, that is problematic.

Her claim that "fiscal health will improve through economic growth" is also questionable.

If Japan concentrates investments in advanced technologies such as artificial intelligence (AI) and semiconductors and achieves a "strong economy," then tax revenue will likely increase. But international competition is fierce, and many government-supported projects have failed in the past.

Sayuri Kawamura, chief researcher at the Japan Research Institute, warns, "It's dangerous to expand fiscal policy based on optimistic forecasts. If the market loses confidence and government bonds are sold off, causing interest rates to skyrocket, the economy will suffer a serious blow."

A need for sustainable policies

Nippon Ishin (the Japan Innovation Party), the LDP's coalition partner, is calling for more efficient spending, but doubts have emerged about whether it can act as a brake on proactive fiscal policy.

The policy of free high school tuition that Nippon Ishin had demanded was introduced this fiscal year without any clear prospects for securing the financial resources for it.

The coalition agreement between the two parties also states that consideration will be given to Nippon Ishin's proposal to set the consumption tax rate on food at zero for two years. If implemented, this would reduce tax revenue by 5 trillion yen (about 32.91 billion dollars) annually, and there is no guarantee the rate could be restored. It could also lead to a decline in medical care and nursing services, which are supported by consumption tax revenue.

To date, government countermeasures against high prices have consisted of stopgap handouts and tax cuts, and their effects have been limited. The prime minister's economic policies place an emphasis on investment in advanced technology and boosting national strength, starting with defense, but they lack a perspective focused on raising the level of people's daily lives.

Widening disparity is increasing the number of people suffering from high commodity prices. Measures to revive the shrinking middle class through wage hikes and redistribution of income are required.

There is a need to support efforts to raise productivity at small and medium-sized enterprises to increase the minimum wage. Changing the structure of Japan's workforce, in which nearly 40% of workers are non-regular employees, is also an urgent task.

A pillar of income redistribution is "tax exemptions with benefits," combining benefits for low-income individuals with tax reductions. Such measures should be swiftly considered.

It is also essential to secure financial resources. Asking the wealthy class and major businesses to shoulder more through stronger taxation on financial income and other measures could also have some effect in correcting disparity.

It is the role of politics to build sustainable public finances while also supporting the lives of the members of the public.