Japan to Miss FY 2018 Deficit-Cutting Target Due to Delay in Tax Hike, Says NHK – Reuters

Japan’s Fiscal Deficit Target Likely to be Missed

TOKYO – Japan is expected to fall short of its deficit-reduction goal for fiscal 2018. This prediction follows the government’s decision to postpone a sales tax increase for over two years, according to a report from public broadcaster NHK, citing an unnamed source.

The Cabinet Office has adjusted its forecast, now anticipating the primary budget deficit to reach 1.9 percent of gross domestic product (GDP) in fiscal 2018, an increase from the previous estimate of 1.7 percent made in January.

The administration led by Prime Minister Shinzo Abe aims to lower the primary budget deficit to 1 percent of GDP in the same fiscal year. The primary budget is a key indicator of fiscal health, excluding debt servicing costs and income generated from bond sales.

In June, the Prime Minister decided to delay the planned sales tax increase, originally set for next April, to October 2019 due to escalating concerns regarding the economy’s stability.

Looking ahead, Japan’s primary budget deficit is projected to be approximately 5.6 trillion yen in fiscal 2020, an improvement from the previously estimated 6.5 trillion yen deficit. This expected decrease is attributed to increased tax revenues from the prior fiscal year and the forthcoming sales tax hike in 2019.

Japan’s primary budget deficit has been on a downward trend and is likely to meet the target set for fiscal 2015, which has yet to be finalized. This decline could halve the deficit as a percentage of GDP, returning to levels last recorded in fiscal 2010.

Despite the challenges, the government remains committed to achieving a primary budget surplus by fiscal 2020, with a focus on stimulating economic growth.