The government will fail to achieve its self-imposed target for reducing the budget deficit in fiscal 2020 despite the consumption tax increase, according to an official estimate made available Thursday.
The goal is to achieve a primary budget surplus for the central and local governments in fiscal 2020 after halving the deficit as a percentage of nominal gross domestic product in fiscal 2015 from the fiscal 2010 level. A primary budget surplus means the country can finance government spending, except for debt-servicing costs, without issuing new bonds.
Under a conservative estimate, however, the government could log a primary budget deficit of about ¥15.4 trillion in fiscal 2020. The fiscal 2015 deficit halving goal could be achieved as the government continues to cap spending amid an expected increase in tax revenues. The estimates, to be reported to a Cabinet meeting Friday, are based on the assumption that the central government will cap annual policy spending at ¥71 trillion over the three years through March 2016 to maintain fiscal discipline.