Tokyo, July 21 (Jiji Press)–The Cabinet Office presented an estimate on Wednesday that Japan will be able to balance its budget in fiscal 2027, two years earlier than the previous projection, under a scenario assuming more than 3 pct nominal economic growth.
Still, the government will fall short of its goal of bringing the primary budget balance for the central and local governments to a surplus in fiscal 2025, according to the new projection.
The Cabinet Office submitted the projection to a meeting of the government’s Council on Economic and Fiscal Policy, chaired by Prime Minister Yoshihide Suga.
A primary budget surplus means that the government can finance its spending on policy measures, except for debt-serving costs, without issuing new debt.
In fiscal 2020, Japan’s budget deficit increased sharply due to a range of measures to address the novel coronavirus epidemic, but national tax revenue was about 5.7 trillion yen higher than previously estimated.
The primary budget deficit for the year, therefore, is now estimated at 56.4 trillion yen, down from the previous projection of 69.4 trillion yen, made in January.
With the effects of the coronavirus crisis on tax revenue now forecast to be smaller than earlier thought, the Cabinet Office estimated a primary budget surplus of 1.8 trillion yen for fiscal 2027.
As the new estimate does not take into account the annual balance improvement of about 1.3 trillion yen in fiscal 2023 and beyond that may be brought about by spending reform including on social security costs, the primary budget balance is projected to stand at a deficit of 2.9 trillion yen in fiscal 2025.
At the same time, the Cabinet Office presented a separate estimate that the balance will improve to a surplus of 1.7 trillion yen in fiscal 2025 if spending reform continues at the current pace.
According to a base line scenario assuming that nominal economic growth, a base factor for estimating tax revenue, will remain at about 1 pct, however, Japan is expected to incur a primary budget deficit of 6.0 trillion yen in fiscal 2030.
As calls for additional fiscal stimulus are growing within the ruling bloc ahead of the next election for the House of Representatives, the lower chamber of parliament, to be held by autumn, Japan’s primary budget balance may not improve as estimated by the Cabinet Office.