The government will cut its tax revenue estimate for fiscal 2019 possibly by more than ¥2 trillion, from ¥62.50 trillion ($575 billion), as a result of weaker-than-expected corporate earnings amid a slowdown in the global economy, according to official sources with knowledge of the matter.
The first possible decline in three years is expected to prompt the government to issue debt to compile a supplementary budget for the year through March in order to finance reconstruction in areas hit by a series of natural disasters, the sources said Thursday.
As a number of firms have cut their earnings forecasts in turn amid fallout from the prolonged U.S.-China trade conflict, corporate tax revenue is expected to fall in the fiscal year, the sources said.
For the first half through September, corporate tax revenue dropped 9.1 percent from a year earlier, according to Finance Ministry data.
The revised estimate is also affected by a tax refund to SoftBank Group Corp. worth around ¥400 billion, the sources said.
Japan’s tax revenue hit a record ¥60.36 trillion in fiscal 2018, exceeding the previous high of ¥60.11 trillion in 1990 at the end of the asset-inflated economic bubble.
The government had earlier projected that tax revenue would top that in the current fiscal year following the consumption tax hike on Oct. 1.
The economy has shown signs of weakening, however. Growth in gross domestic product slowed in the July-September period from the previous quarter on weak consumer spending and exports, the government said earlier in the day.
The consumption tax hike from 8 percent to 10 percent is also expected to drag the economy down in coming months.
It is also unclear when there may be some resolution to the ongoing trade war between the United States and China, which has already dented Japan’s exports.