The government is still on track to miss a key fiscal rehabilitation goal in fiscal 2020, government sources said Wednesday.
The sources said the government is set to leave its projection for missing the goal unchanged in its upcoming medium- to long-term fiscal estimate.
Though Japan will stick with the goal of turning its primary balance deficit into a surplus in fiscal 2020 via spending and revenue reforms, it will likely fail to show how much such reforms can reduce the deficit, the sources said.
A deficit in the balance means the country cannot finance government spending other than debt-servicing costs without issuing new bonds.
Japan’s fiscal health is the worst among major industrialized economies, with public debt at more than 200 percent of nominal gross domestic product due mainly to swelling social security expenses amid an aging society.
The Cabinet Office plans to release the medium- to long-term fiscal estimate next month after the government adopts its fiscal policy guidelines later this month, which are likely to refrain from setting specific numerical targets to curb spending.
According to the office’s estimate in February, Japan’s primary balance deficit is expected to total ¥16.4 trillion for fiscal 2015 from April. The country would be left with a deficit of around ¥9.4 trillion in fiscal 2020 even if robust nominal GDP growth of more than 3 percent a year continues.
The office’s upcoming estimate is likely to show some shrinkage in deficit for this fiscal year thanks to an increase in tax revenue stemming from favorable corporate earnings.
But it remains unclear whether Japan can meet the key fiscal reform goal amid a continuing lack of a specific road map for reducing the deficit.