(Bloomberg) -- Japan’s government reaffirmed its commitment to achieving a primary balance surplus next fiscal year in a draft of its economic and fiscal policy plan released Tuesday.

It was the first time since 2021 that the government explicitly mentioned the budget goal in its annual policy guidelines, underscoring an increased likelihood it can achieve it and growing urgency with interest rates poised to rise. 

The government also outlined the need for continued growth in wages to help the economy reach a new stage, and plans to support chip production.

“We aim to achieve a sustainable economy through economic, fiscal and social security reforms that ensures people can feel wealth and happiness,” Prime Minister Fumio Kishida said, referring to the plan.

Record tax receipts, partly thanks to inflation and a weak yen, created an unexpected boon for the government last year, putting it on track to reach a surplus after high levels of spending at one point appeared to put the goal out of reach.

Still, the plan shows that in a baseline scenario case with real annual economic growth of around 0.5%, it won’t be able to maintain a primary balance surplus in the 2030s.

The Cabinet is expected to approve the government’s latest policy vision later this month.

This year’s policy blueprint highlights changing perceptions about economic and financial conditions after the Bank of Japan ended its massive monetary easing program in March with its first interest rate increase since 2007. 

The draft plan notes that “monetary policy has entered a new phase,” and it conveys hope that the BOJ will achieve a virtuous cycle linking wage gains to demand-led price increases in line with its 2% stable inflation target.

Kishida cited the need for sustained growth in pay to enable the economy to reach a new phase by 2030.

The draft also outlines challenges, including “concerns over rising debt-servicing costs amid the transition to an environment with interest rates.” Currently, Japan’s 10-year yield stands above 1%, after breaching the threshold for the first time in over a decade last month.

Separately, Kishida also presented his other policy focus of economic security in the plan. The government will consider legislative measures related to mass production of next-generation semiconductors, expanding available loans and investments to make supply chains more robust.

Already the industry ministry is supporting Rapidus Corp., which aims to mass produce 2 nanometer logic chips in 2027 in northern Hokkaido. The government has earmarked up to ¥920 billion ($5.8 billion) for the home-grown venture. Rapidus has so far secured only ¥7.3 billion from major Japanese companies including Toyota Motor Corp. 

Providing government loan guarantees can be an option to support Rapidus further, the ministry said.

--With assistance from Yuki Hagiwara.

(Adds comments from Prime Minister Fumio Kishida)

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