Photographer: Tomohiro Ohsumi/Bloomberg

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Japan's Budget Goal Is Being Deferred Again

  • Key fiscal target won’t be reached until the late 2020s
  • Achieving a primary surplus is key to addressing debt

One of Japan’s key targets for addressing its ballooning debt is set to be pushed further into the future when the Cabinet Office updates economic forecasts next week.

The primary balance, which measures the government’s fiscal position excluding interest payments on its borrowings, was meant to come out of the red in fiscal 2020. Reaching the goal was seen as a first step for Prime Minister Shinzo Abe’s administration to arrest debt growth, so the country could then begin to whittle it down.

Yet a best-case projection for a primary balance surplus was reset to 2025 in a revision last year and now it’s going to be deferred again, until sometime in the late 2020s, according to an official who asked not to be named, citing government policy. The Nikkei newspaper reported 2027 as the likely year.

Wishful Thinking

Even the best-case forecast now looks overly optimistic

Source: Cabinet Office data. Note: Data through FY2015 based on finalized budget, FY2016 data based on finalized budget outline, FY2017 based on budget. Figures exclude disaster reconstruction spending.

With Japan’s public debt burden at about 240 percent of gross domestic product -- the heaviest burden of any developed nation -- a lot is at stake.

The aging population makes controlling spending on social welfare and health care a perennial challenge, and as the population shrinks the country’s debt per capita is steadily increasing. The budget for the fiscal year starting this April reached a record 97.7 trillion yen ($885 billion).

The question is, will the new forecasts be any better? The government’s estimates to date have all fallen short.

Off Target

Source: Cabinet Office

The Cabinet Office is expected to provide the new forecast on Jan. 23. Finance Minister Taro Aso has said the government will produce a new road map this summer for reaching a primary balance surplus.

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