The government collected around ¥55.5 trillion ($495 billion) in tax revenue in fiscal 2016, down from ¥56.29 trillion in fiscal 2015, posting the first year-on-year drop in seven years, sources said.
The fall was largely attributable to the firming of the yen, which dented exporters’ profits and therefore corporate tax revenue during the fiscal year ended March 31, the sources said Wednesday.
The last time tax revenue fell on year was in fiscal 2009, during the global financial crisis caused by the collapse of the U.S. housing bubble.
The administration of Prime Minister Shinzo Abe has been relying on growth in tax revenue in recent years to add fiscal stimulus to the deflation-mired economy. The drop in fiscal 2016, however, points to the limits of that strategy.
Revenue from corporate, income and consumption taxes all fell compared with the previous fiscal year, the sources said.
The government initially estimated it would collect ¥57.60 trillion in tax revenue in its initial budget for fiscal 2016. It was forced to reduce that to ¥55.86 trillion at the end of last year, when a supplementary budget was compiled.
The final fiscal figures, expected to be released in July, are expected to show a tax shortfall of around ¥2 trillion compared with the initial estimate, making it likely that the tax revenue forecast for fiscal 2017 will be revised down from the current estimate of ¥57.71 trillion.