The Japanese economy is on the path toward a full-scale recovery driven by the private sector. The next major challenge for the nation is to its rebuildfiscal health, which is now the worst among the key industrialized countries.
As a near-term goal, the government needs to achieve a primary balance -- a condition where expenditures excluding interest payments and debt redemptions are covered by revenues excluding bonds -- or a surplus.
Fortunately, the Japanese economy is now in a positive cycle where improved corporate activities are creating jobs and increasing consumption, which is expanding tax revenue. As a result, the fiscal situation is gradually moving in the direction of a primary balance.