The government's latest medium- to long-term economic and fiscal estimate shows that it will fall short of a primary balance surplus by ¥2.3 trillion in fiscal 2025. Even if the consumption tax is raised to 10 percent in October as planned, the government expects to miss its target of a surplus in 2025 by at least two years. The estimate, presented to a meeting last week of the Council on Economic and Fiscal Policy, is yet another reminder that the government, for its goal of fiscal rehabilitation, needs to do more to reduce spending and boost revenue to cut the deficit based on a more practical scenario.
The estimated deficit in the primary budget balance as of 2025 increased by ¥1.2 trillion from the previous Cabinet Office forecast in January, as the government downgraded the fiscal 2019 GDP growth forecast from the initial 1.3 percent to 0.9 percent — due the further slowdown in China's economy amid its trade disputes with the United States and resulting falls in Japanese exports to the Asian market — and factored in the anticipated decline in tax revenue.
A primary balance surplus enables the government to cover for its policy-related expenses without incurring fresh debts. The total debt incurred by the national and local governments combined has topped ¥1.1 quadrillion. Achieving a primary balance surplus — and not incurring fresh debt each year — is deemed a milestone in the nation's efforts to rebuild its fiscal health.