• Kyodo


The government is likely to project a deteriorating primary balance deficit in fiscal 2018 after delaying the second stage of a consumption tax hike, government sources said Friday.

The hike, earlier planned for April, will now take place in October 2019.

Cabinet Office projections due to be released next week show the ratio of the primary balance deficit — which excludes debt servicing and revenue from new debt — to nominal gross domestic product will be around 1.9 percent in fiscal 2018, higher than the 1.7 percent estimated in January.

This means the government will find it harder to meet its medium-term goal of reducing the ratio to around 1 percent by fiscal 2018, in the run-up to achieving the internationally committed goal of a primary surplus by fiscal 2020.

For fiscal 2020, the government is likely to project a primary deficit of around ¥5.6 trillion, smaller than the ¥6.5 trillion forecast in January, thanks to higher tax revenues on economic growth and spending cuts, the sources said.

A deficit in the primary balance means the government cannot finance its annual budget, excluding 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 GDP. This is due mainly to swelling social security costs as the population ages.

The January estimates were based on an “economic revival scenario,” under which Japan will achieve economic growth of more than 3 percent in nominal terms from fiscal 2018.

The government revises its medium- to long-term fiscal estimates every six months.

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