As noted in the Financial Times editorial ‘How to pass unpopular reforms’ on 26 April, many advanced and developing economies are stretched. In particular, the finances of Japan, whose outstanding debt is more than twice its gross domestic product, are particularly dire. Beyond what is described in the article, I would like to add two further lessons for fiscal reform from Japan’s current situation.

The first is to eliminate myths that mislead the perception of the current situation. Given the above situation in Japan, one might assume there is a growing debate about austerity. However, heretical beliefs in economics, such as the assertion that budget deficits are not a problem as long as the government borrows in its currency, have become fashionable among politicians and an obstacle to fiscal consolidation. With the upcoming upper house election this summer, both the ruling and opposition parties are pledging tax cuts, bond issues and subsidies. We can find little sense of crisis in their mind. We must not forget that trust in a currency is a cornerstone of national wealth in the modern era and that the market, not optimism, determines its credibility.

The editorial referred to the need for gradual policies to cushion the shocks. Pain is inherent in reform, but it must be equal. In other words, the burden of reform should be distributed fairly across all sectors of society rather than disproportionately affecting certain groups. This is the second lesson. The primary factor in Japan’s budget deficit is the increase in social security costs owing to its ageing population. As a result, hiking social insurance fees becomes a heavy burden on the working-age population. In the country, there are proposals to increase the consumption tax and reduce social insurance contributions instead. Still, few parliamentarians are in favour of this because the consumption tax may face public wrath and has been the cause of the current ruling party’s fall from power in the past, making it like a plague.

Consequently, an impartial leader with calm insight and a broader view is essential for reform.