The government is eyeing fiscal 2025 as its new target year to achieve a primary balance surplus, delaying the fiscal health goal by another five years, sources said Wednesday.
Prime Minister Shinzo Abe’s administration has already given up on its previous target year of fiscal 2020, opting to use added revenue from the second stage of the consumption tax hike next year on school subsidies rather than paying down the nation’s massive public debt.
The time frame will be decided by the Abe administration, the ruling Liberal Democratic Party and junior coalition partner Komeito after the Golden Week holidays. It is expected to be announced in June along with steps to rein in social security costs.
Without such steps, the primary balance — annual tax revenues minus outlays other than debt-servicing costs — will run a deficit of at least ¥3.8 trillion ($35 billion) in fiscal 2025, according to the Cabinet Office’s projections in January.
Those projections say the government will run a deficit through fiscal 2026 or longer, which skeptics say is overly optimistic because it assumes Japan will see sufficiently strong economic growth to boost tax revenue.
In the meantime, social security costs are on the rise amid a rapidly graying population and are expected to swell further as the baby boomer generation passes the age of 75 in the coming years, entitling them to greater benefits.
The government limited budget increases for social security spending to around ¥500 billion per year between fiscal 2016 and fiscal 2018, and will need to find ways to keep expenditures from skyrocketing.