On the back of growth in tax revenue amid improvement in corporate profits, the deficit in Japan’s primary balance is expected to shrink to around ¥14 trillion in fiscal 2015 starting April 1, according to Finance Ministry sources.
A fall in the deficit suggests that Prime Minister Shinzo Abe’s Cabinet is likely to achieve its key fiscal rehabilitation goal of halving the ratio of the primary balance deficit to gross domestic product by fiscal 2015 from the fiscal 2010 level.
To attain that target the government said, in a medium-term fiscal reform plan crafted in 2013, it should slash the primary balance deficit to about ¥15 trillion in fiscal 2015.
A deficit in the balance means the country cannot finance government spending other than debt-servicing costs without issuing new bonds. An improvement in the balance is viewed as a critical first step toward fiscal consolidation.
But it will be difficult for Abe to restore the nation’s precarious public finances, given that social security costs, which account for 40 percent of Japan’s policy spending, have increased by ¥1 trillion annually due to a rapidly graying population.
In the next fiscal year, central government tax revenue is estimated to total nearly ¥54 trillion, the highest level in 22 years, the sources said.
The Finance Ministry said Monday that government tax revenue for fiscal 2014, ending March 31, is forecast to reach around ¥51.7 trillion, the highest in 17 years.
As tax revenue is projected to grow, with corporate earnings improving on the back of a weaker yen, the government plans to cut new bond issuance by more than ¥3 trillion from the previous year to below ¥38 trillion, the sources said.
It will be the first time in six years that new debt issuance had been kept below ¥40 trillion.
The government is scheduled to endorse the fiscal 2015 budget on Jan. 14.
Finance Minister Taro Aso, however, said earlier Monday that the annual budget for fiscal 2015 is unlikely to be enacted by the March 31 end of the current fiscal year due to delays caused by the snap election on Dec. 14.
“We have to make efforts to minimize the impact (of a delay in the budget enactment) on the economy,” Aso told ministry staff in a New Year address to.
Usually, the government approves an annual budget for the next fiscal year at the end of December for passage through the Diet in March.
If Diet schedules do not allow the budget to pass by March 31, the ministry will have to compile a stopgap budget.