• Kyodo

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The state of Japan’s public finances is “extremely severe,” Finance Minister Taro Aso said on Thursday, vowing to do whatever is needed to boost revenues and cut expenditures to restore the country’s fiscal health.

Aso, who is also deputy prime minister, said Tokyo will stick to its goal of turning the primary balance into a surplus by fiscal 2020. The government will map out concrete plans by this summer to achieve the key fiscal rehabilitation target, he said.

“To ensure the credibility of Japan’s fiscal policy, we will absolutely implement a consumption tax hike to 10 percent in April 2017,” he said in a speech to the Diet, referring to the second stage of the consumption tax hike. The 8 percent sales tax was 5 percent before the first hike last April.

On the spending front, Aso said Prime Minister Shinzo Abe’s government will continue to review its expenditures, including those for social security programs that have been ballooning as the population ages.

Japan’s fiscal health is the worst among major industrialized economies, with public debt at more than 200 percent of nominal gross domestic product. Central government debt has topped ¥1 quadrillion.

As for Japan’s economic situation, Aso claimed the economy is “on the verge” of entering a virtuous circle, in which an improvement in corporate profits leads to growth in wages and consumption.

Aso said the government will work harder to put the economy onto a sustainable recovery path by carrying out its “Abenomics” growth strategy, including corporate tax cuts and structural reforms to deregulate the health care and agriculture industries.

Economic and fiscal policy minister Akira Amari said in a separate speech that Japan’s economy has been recovering moderately, but that private spending remains weak since the 3-point consumption tax hike last April.

“We will make more efforts to promote and develop Abenomics,” Amari said, referring to the package of policies based mostly on drastic monetary easing by the Bank of Japan, public spending and elusive reforms in a growth strategy aimed at shoring up private-sector investment.

On Thursday, the Cabinet submitted to the Diet a record-high ¥96.34 trillion ($801.80 billion) general account budget for fiscal 2015 aimed at spurring consumer demand, which has waned in the wake of last year’s tax hike and the BOJ’s weakening of the yen.

The annual budget may not be enacted by the end of this fiscal year on March 31, as the budget compilation process was delayed when Abe called the snap Dec. 14 House of Representatives election, which drew the lowest voter turnout in history.

If Diet schedules do not allow the budget to pass by March 31, a stopgap budget will be formulated.

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