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Japan’s goal to restore its fiscal health, the worst among developed countries, is still far off amid prospects for tepid economic growth and swelling spending on health, pensions and defense.

Furthermore, reining in spending and boosting tax revenue have become more difficult since a consumption tax hike was twice postponed and the yen appreciated against the U.S. dollar to the detriment of exporters’ profits.

As difficulties mount, many economists believe Japan will not be able to meet its target of achieving a primary surplus by fiscal 2020 as internationally pledged, let alone an interim milestone set for fiscal 2018.

“Should attaining the targets be dropped or postponed, confidence in Japan’s finances will be eroded,” said Yuichi Kodama, chief economist at Meiji Yasuda Life Insurance Co.

“Since the delaying (in 2016) of the consumption tax hike, the administration’s commitment or willingness to restore fiscal health has been waning,” Kodama said.

A primary balance deficit means a country cannot finance its annual government budget without issuing new bonds, even when debt-servicing costs are excluded.

Japan’s primary deficit in fiscal 2020 is now expected to total ¥8.3 trillion, up from ¥5.5 trillion projected in July. And its ratio to nominal gross domestic product is projected at 1.4 percent, up from 1 percent, according to the Cabinet Office.

But analysts at SMBC Nikko Securities Co. paint an even bleaker picture, putting the ratio at around 3 percent in fiscal 2020.

The government scenario is less pessimistic, as the Cabinet Office expects the economy will expand by 3 percent or more in nominal terms, and by at least 2 percent in real terms, over the medium-to-long term.

“Economic revitalization comes first and foremost. If that foundation collapses, nothing can be achieved (in terms of fiscal reconstruction),” a senior government official said.

Yet despite repeated actions by the government of Prime Minister Shinzo Abe to stimulate faster growth, consumer spending remains sluggish, partially because of a 2014 sales tax hike that triggered a surge in spending before it took effect. That hike in the consumption tax — from 5 to 8 percent — was taken to cover ballooning social security costs. Another hike to complete its doubling to 10 percent has been postponed twice.

If Japan misses the interim target of bringing the ratio of its primary deficit to nominal GDP to around 1 percent in fiscal 2018, that will be blamed on postponing the second part of the hike to October 2019 from April 2017, according to some economists.

And Japan will continue to struggle to rein in its deficit as social security costs, which currently account for roughly 30 percent of government spending, are expected to keep increasing in coming years as the number of retirees mushrooms.

“Japan needs to tackle challenges posed by its low birthrate and aging society for the economy to grow . . . but it seems to me that the government is not serious about solving them, given its reluctance to take in immigrants for example,” said Yasunari Ueno, chief market economist at Mizuho Securities Co.

The world’s third-largest economy is expected to grow moderately this year, though much depends on U.S. President Donald Trump, who has pledged to boost infrastructure spending and cut taxes but who has also adopted a protectionist stance on trade.

Hopes are high in financial markets for U.S. economic growth as the euphoria sparked by Trump’s election victory in November sent the Dow Jones industrial average above 20,000 this past week for the first time.

Trump’s pro-growth initiatives may provide a tailwind for the Japanese economy, which has been struggling to break with deflation for years, analysts say. But debt-ridden Japan is constricted in its ability to spend its way to prosperity.

“We know that the effects (in Japan) of increasing public investment or building roads, for instance, will be limited. What matters is where money is spent,” Ueno said.

Still, the government draft budget for the fiscal year starting April 1 totals a record-high ¥97.45 trillion — and some economists predict an extra budget will also be compiled later in the year.

Government officials stress that there is a need for efforts to curb spending, with Economic and Fiscal Policy Minister Nobuteru Ishihara recently saying, “We need a strong will to do it” for the sake of fiscal rehabilitation.

But it is difficult to curb not only social security expenditures but also policy-related outlays, especially when defense spending looks set to keep rising.

Koya Miyamae, senior economist at SMBC Nikko Securities, said Japan’s defense spending, which remained at around 1 percent of GDP for years, could increase now that Trump has taken office.

Since Abe took office in December 2012, defense spending has been rising in response to China’s maritime assertiveness and North Korea’s missile threats.

That was before Trump said during the presidential election last year that Japan should pay a greater share of the costs for stationing U.S. forces in the country.

“After the mid-term defense buildup plan (from fiscal 2019) is compiled, there is a possibility that we will see defense spending increase gradually,” Miyamae said. “This could worsen the primary balance in the 2020s.”

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