TOKYO (MNI) – Japan is estimated to post a primary budget deficit
worth Y23.2 trillion, or 4.2% of nominal GDP, in fiscal 2020, even if
the economy grows at around 1.5% every year in the next decade, the
latest projection released by the Cabinet Office on Friday showed.
The new forecast bodes ill for the government’s efforts to put the
fiscal house in order. Last year, it set a target of turning the gap
into a surplus by fiscal 2020.
The primary fiscal deficit — the budget deficit excluding both
debt-servicing costs from spending and debt issues from revenue — is
expected to total Y21.7 trillion in fiscal 2015, also 4.2% of GDP,
according to the projection.
Last June, the government said it will try to slash the primary
deficit to 3.2% of nominal GDP by fiscal 2015 from 6.4% of the total
output estimated for the current fiscal year ending March 31.
The latest projection is based on preliminary July-September GDP
data as well as the government’s economic outlook and budget plans for
fiscal 2011.
In the fiscal 2011 draft budget, which will be sent to parliament
next week, tax revenue is estimated to stay below the amount of new
government bond issues for the third straight year.
To meet the government’s target of posting a primary budget surplus
by 2020, the consumption tax rate would have to be raised to 14-15% from
the current 5%.
A sales tax increase by a full percentage point is believed to
generate an additional tax revenue of around Y2.5 trillion.
The outstanding balance of public debt issued by both the central
and regional governments is expected to exceed 200% of GDP in fiscal
2016, surging from an estimated 173.8% in fiscal 2010, the projection
showed.
In a more optimistic scenario, Japan’s primary balance deficit
would be limited to 3.2% of nominal GDP in fiscal 2015 and to 2.5% in
fiscal 2020 if real GDP grows more than 2% every year.
tokyo@marketnews.com
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