The government will start working on a new fiscal rehabilitation plan this month after Prime Minister Shinzo Abe gutted the previous one by pausing the doubling of the consumption tax last year, sources close to the matter said.
The plan will again put emphasis on economic growth to boost tax revenues and include details on how it will achieve its long-held fiscal reform goal of turning Japan’s primary balance into a surplus by fiscal 2020, they said Friday.
A deficit in the balance means Japan cannot finance government spending other than debt-servicing costs without issuing new bonds. Improving the balance is viewed as the first step that Japan, which has the biggest debt burden in the industrialized world, needs to take toward fiscal consolidation.
Many analysts say Abe’s administration won’t be able to achieve the goal by fiscal 2020 within revising the current reform plan, given his decision last year to put off the second stage of the consumption tax hike by 18 months until April 2017. The levy will rise to 10 percent after the second stage of the hike.
The government plans to hold a meeting of the Council on Economic and Fiscal Policy later this month. The private-sector members of the influential panel are likely to call for a new team to work on the fiscal reform plan, the sources said.
The new plan is expected to be incorporated into the government’s medium- to long-term economic and fiscal policy blueprints scheduled to be released this summer.