Japan Set to Miss FY2020 GDP Target of 600 Trillion Yen, Moving Further from Goal – Reuters

By Minami Funakoshi

TOKYO (Reuters) – Japan is unlikely to meet its target of achieving a nominal gross domestic product (GDP) of 600 trillion yen (approximately $5.7 trillion) in fiscal 2020 and may not reach this goal even by fiscal 2024 if economic growth continues to falter, according to projections released by the government on Tuesday. This information adds additional pressure on policymakers who are already grappling with revitalizing the economy.

Currently, Japan anticipates a nominal GDP of 551 trillion yen for the fiscal year starting in April 2020, based on the existing growth trajectory, as reported by the Cabinet Office.

Furthermore, Japan is expected to record a primary budget deficit of 9.2 trillion yen if growth remains tepid, and it is projected to miss its target of achieving a primary budget surplus even by fiscal 2024. These forecasts presuppose a mid- to long-term real economic growth rate of 1 percent or less and do not factor in a significant stimulus package anticipated in the upcoming autumn.

Japan has consistently shifted away from its ambitious goal of reaching a nominal GDP of 600 trillion yen. Despite the implementation of Prime Minister Shinzo Abe’s “Abenomics,” which encompasses extensive monetary easing, fiscal stimulus, and structural reforms, the government has revised its nominal GDP estimates downward three times consecutively since Abe took office in late 2012.

In August 2013, the nominal GDP for fiscal 2020 was estimated to be 620.7 trillion yen, a target that now appears nearly unattainable.

Nevertheless, Abe remains hopeful, telling reporters following a session with the Council on Economic and Fiscal Policy, the government’s advisory board, that efforts will continue to pursue the 600 trillion yen GDP goal through reforms in expenditure. He asserted that the government remains committed to reaching a primary budget surplus by fiscal 2020.

Even under a favorable scenario with an assumed increase in economic growth, Japan is still projected to miss its GDP target and its aim for a primary budget surplus in fiscal 2020. With an assumed real economic growth rate of 2 percent or higher, Japan anticipates a nominal GDP of 582.7 trillion yen for that fiscal year along with a primary budget deficit of 5.5 trillion yen.

Economy Minister Nobuteru Ishihara conveyed the government’s commitment to advancing fiscal reforms progressively, addressing reporters after the panel meeting.

The primary budget, which excludes costs associated with debt servicing and income from bond sales, serves as a crucial indicator of fiscal health. In June, the prime minister postponed a planned sales tax hike from April to October 2019 due to increasing economic uncertainties—a move that has raised concerns among some economists about potential repercussions for Japan’s fiscal discipline.