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Japan and Sri Lanka: Fiscal Fix-Overs, Not Political Change

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  //politics-government.news-articles.net/content/ .. lanka-fiscal-fix-overs-not-political-change.html
  Published in Politics and Government on Wednesday, December 24th 2025 at 15:28 GMT by ThePrint

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Japan and Sri Lanka: A Tale of Fiscal Fix‑Overs, Not Political Change

A new feature in The Print argues that Japan and Sri Lanka have tripped over the same political misstep: substituting fiscal policy for genuine political action. By examining the two countries’ recent policy paths, the piece reveals how a reliance on monetary measures has left deep‑rooted challenges unaddressed, while promising short‑term relief that ultimately risks reinforcing systemic problems.

The Premise: Fiscal Policy as a Political Panacea

The article opens with a critique of the prevailing narrative that fiscal policy can fix any political failure. In both Japan and Sri Lanka, governments have turned to expansive spending and tax incentives in a bid to stimulate growth, modernise infrastructure, and tackle crises. However, the writer contends that these measures are often more symbolic than substantive. They provide temporary boosts to the economy but fail to tackle structural weaknesses such as weak governance, policy inertia, and long‑term socio‑economic imbalances.

Japan’s Climate‑Centred Fiscal Strategy

Japan’s case centers on its 2022 “Carbon Neutrality Strategy,” a broad set of measures that pledge to make the nation net‑zero by 2050. The plan incorporates:

• Subsidised electric‑vehicle (EV) sales – a generous tax credit that encourages domestic and imported EVs.
• Carbon‑tax reforms – a phased approach to tax carbon‑emitting fuels.
• Public‑private partnership (PPP) incentives – tax breaks for corporations that invest in green infrastructure.
• R&D stimulus – earmarked funding for clean‑energy research and development.

While the policy is lauded for its ambition, the article highlights concerns raised by economists and environmentalists. Critics argue that the subsidies and tax breaks largely benefit large corporations and affluent consumers, offering minimal upside for lower‑income households. Moreover, the plan’s emphasis on technology transfer from overseas firms risks undermining Japan’s domestic industry, leaving local manufacturing in a vulnerable position.

The piece notes that Japan’s fiscal policy has also been employed to cushion the economy from the fallout of the COVID‑19 pandemic. Massive stimulus packages, including direct cash transfers and industrial subsidies, were designed to avert recession. Yet, this “fiscal cushion” has added to the country’s already substantial public debt, raising questions about long‑term sustainability.

Sri Lanka’s Debt Crisis and Fiscal‑Only Fixes

Sri Lanka’s story runs parallel, but with a focus on a sovereign debt crisis that has rattled the island nation for years. The article recounts how successive administrations have leaned heavily on fiscal tools—such as tax cuts, subsidies, and expansive public spending—to mitigate social distress and stabilize the economy amid a mounting debt burden.

Key fiscal measures include:

• Tax rebates and excise tax cuts for the lowest‑income brackets to relieve immediate pressure on households.
• Infrastructure spending to create jobs and spur domestic demand.
• Foreign‑exchange interventions to shore up the currency, funded through additional borrowing.

While these interventions have provided temporary relief, the article underscores how they have not addressed the core issue: a structural imbalance between government spending and revenue collection. Critics point to Sri Lanka’s failure to enforce fiscal discipline, a problem amplified by political pressure and lack of robust institutions.

In addition, the article points to the IMF’s conditions for bailouts—focusing on fiscal consolidation and structural reforms—as evidence that international creditors see fiscal policy alone as insufficient. The Sri Lankan government’s approach is described as a “fiscal patch‑job” that postpones necessary reforms rather than implementing them.

The Shared Shortcomings

Both nations, the article argues, face a common dilemma: fiscal measures are convenient political tools that can be enacted quickly and used to placate public demand. Yet they fall short of addressing deeper institutional failings.

• Governance deficits – In Japan, bureaucratic inertia slows the deployment of green initiatives. In Sri Lanka, weak regulatory frameworks and corruption undermine fiscal policy efficacy.
• Unequal benefit distribution – Subsidies and tax breaks tend to favor the wealthy or large corporations, widening inequality.
• Debt sustainability – The reliance on borrowing to fund fiscal stimulus strains public finances, raising long‑term fiscal risks.

The piece concludes that a more balanced approach—pairing fiscal measures with concrete political reforms—is essential for lasting progress. In Japan, that might mean strengthening the institutional capacity of ministries to implement green projects, or enforcing stricter checks on subsidies. In Sri Lanka, it could involve institutional reforms to improve revenue collection, strengthen anti‑corruption bodies, and create a transparent budgeting process.

Further Reading and Context

The article is supplemented by links to several other sources that deepen the discussion:

1. Japan’s Ministry of Finance – Carbon Neutrality Initiative – A government report outlining the tax incentives and investment frameworks tied to green technology.
2. World Bank – Sri Lanka Debt Sustainability Analysis – An analytical backdrop showing how fiscal policy has interacted with Sri Lanka’s debt levels over the past decade.
3. International Monetary Fund – IMF‑Sri Lanka Country Report – A detailed overview of the conditions attached to Sri Lanka’s financial assistance, stressing the need for fiscal consolidation.

These references provide readers with a richer understanding of the policy environment and the economic data that support the article’s assertions.

Takeaway

The Print’s feature highlights an uncomfortable truth: fiscal policy, while essential, cannot replace the need for decisive political action. For Japan, the challenge lies in ensuring that its green subsidies translate into real, inclusive progress. For Sri Lanka, the path forward demands institutional reforms that move beyond fiscal band‑aging to tackle the root causes of its debt crisis. Without such reforms, both countries risk a cycle where fiscal fixes mask deeper problems, leaving them vulnerable to future economic shocks.