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Japan to miss 2020 budget surplus goal regardless of sales tax hikes

Kyodo

Japan is unlikely to meet its international commitment to achieve a government budget surplus by fiscal 2020, even if it proceeds with another consumption tax increase, sources said Saturday.

There is likely to be an ¥11 trillion deficit in the primary balance in fiscal 2020 even if the consumption tax rate, raised this past April from 5 percent to 8 percent, is increased to 10 percent in October 2015 as planned, the sources said.

The figure is expected to be set for fiscal 2020 in a mid- to long-term balance estimate to be released this month, the sources said.

The forecast deficit is down from a January estimate of ¥11.9 trillion, but still means Japan is unlikely to achieve its goal to turn the balance into a surplus by fiscal 2020.

However, under the new projections, Japan is likely to achieve another goal — halving the ratio of the primary balance deficit to gross domestic product by fiscal 2015 from the fiscal 2010 level, according to the sources.

A balance deficit means the nation cannot finance government spending without borrowing by issuing bonds. An improvement in the balance is viewed as the critical first step toward fiscal rehabilitation.

The government plans to set the estimate as early as next Friday, when it releases fiscal 2015 budget request guidelines approved by the Cabinet.

Japan’s fiscal health is the worst among major developed economies with public debt equivalent to well over 200 percent of GDP.

  • Demosthenes

    Is this really a surprise? Did they actually think raising taxes was going to help with the deficit? Japan is the titanic, baby. Nothing left to do but let the band play on as she sinks.