TOKYO – Japan’s government laid out a fresh plan on Friday to boost childcare over the coming three years to stem a relentless drop in the country’s birth rate, a move that may lead to another big spending package and strain its already tattered finances.

Under the plan, the government will take steps such as expansion of child allowances to be given without income limits.

While the government has earmarked 6.1 trillion yen (S$60.8 billion) for steps to arrest the declining number of children, a senior ruling party lawmaker was quoted by media as demanding an additional eight trillion yen to fund the new measures.

“A boost to child allowances alone could cost two trillion to three trillion yen. It sounds like the same old spending spree, which did not necessarily help turn around the birth rate,” said Mr Takahide Kiuchi, a former central bank board member and now an economist at Nomura Research Institute.

“The government may end up issuing extra bonds, arguing that education-oriented bonds help future generations,” he added.

Prime Minister Fumio Kishida has repeatedly vowed to double childcare-related spending but has steered clear of elaborating on details, which he said will firm up in June when the government decides on a mid-year key policy road map.

Finance Minister Shunichi Suzuki on Friday said Japan must come up with a “permanent source of revenue” to fund childcare policies, but voiced caution over the idea of issuing extra debt.

Mr Ranil Salgado, the International Monetary Fund’s Japan mission chief, urged Tokyo to target such financial incentives towards low-income households.

“Everyone acknowledges childcare support is important, given Japan’s need to boost the growth rate. But we still believe those measures could be, or any support, should be targeted,” he told an online briefing on Friday.

Japan is among the world’s fastest-ageing societies, with the number of newborns falling below 800,000 for the first time, having peaked at 2.09 million in 1973 during the second baby boom.

The declining trend has been blamed for intensifying labour shortages and pushing down Japan’s long-term growth potential.

Some analysts see the latest plan as a sign Mr Kishida is trying to shore up support and gearing up to call a snap election in the coming months, to solidify his standing within the ruling party.

“Opposition parties also have no objection to boost childcare spending,” said political analyst Atsuo Ito.

“Both sides appear to join in a race to boost reckless spending.” REUTERS