A midterm review by the government shows once again that fiscal consolidation efforts under the Abe administration are falling short. The primary balance deficit in fiscal 2018 is estimated to be ¥6.9 trillion larger than it was projected just three years ago — due to the postponement of a consumption tax hike and resorting to extra budgets to fund stimulus measures, as well as the economy's growth falling short of the government's bullish forecasts.
After giving up on its earlier goal of eliminating the primary balance deficit by 2020, the administration is seeking to come up with a new target for fiscal rehabilitation by June. But the review, presented to a recent session of the Council on Economic and Fiscal Policy, reminds us that fiscal consolidation plans counting on a rosy economic growth forecast to pay its way out of the deficit may prove to be a pie in the sky.
The current plan, put together in 2015, set a midterm target of containing the fiscal 2018 primary balance deficit within 1 percent of the nation's gross domestic product — as a prelude to achieving a primary balance surplus in 2020. As it turned out, the primary budget balance did not improve as projected, and the deficit as of the current fiscal year is now forecast to remain at levels equivalent to 2.9 percent of GDP.