Japan will stick to the FY2025 target to balance the budget

By Leika Kihara and Tetsushi Kajimoto

TOKYO (Reuters) – Japan will maintain its budget target for 2025 in the coming weeks as it reviews the deadline, Mainichi Shimbun reported on Thursday in an early victory for advocates to order the country’s fiscal house.

Whether or not the government will maintain or reject the goal of more stimulus spending as Prime Minister Fumio Kishida faces pressure from the Liberal Democratic Party (LDP) in his government.

As part of its efforts to reduce its large public debt, Japan has spent years repaying its main budget, removing new bond sales and debt management costs, to return to a surplus in its annual fiscal plan.

The government has repeatedly rejected the goal of achieving primary balance. He warned that the final commitment to be made in 2025, given the economic damage caused by the COVID-19 pandemic, would be reassessed.

The government will make its own estimates that it can be met in fiscal 2026, leading to strong economic growth and high tax revenues, the business daily reported separately.

“It is true that tax revenues are being surpassed by the return of massive stimulus spending, but it would be risky to assume a pink scenario that would continue to be high tax revenue, given the uncertainty like Omicron’s appearance,” Hiroshi Shiraishi, senior economist at BNP Paribas. (OTC 🙂 Securities, he said.

“Japan needs to carry the flag of fiscal reform to gain the confidence of its debt management market, but it would be difficult to achieve the main goal of the balance, given the risk of a ‘fiscal cliff’ that could be triggered by the stimulus.”

Nikkei reported that the government would advance its medium-term forecast of a surplus by one year, until 2026, when it expects higher corporate tax revenues through an economic recovery.

It is doubtful, however, whether Japan will be able to accelerate its efforts to maintain its fiscal house, as Kishida is under pressure to maintain or increase spending before the chamber elections later this year.

Government officials declined to comment on the media reports.

A large majority of Japanese companies want to continue fiscal support for at least this year, according to a Reuters poll, although major economies from Europe to the United States are pushing back crisis-ridden economic promotion programs.

Japan has a public debt of more than double its $ 5 trillion economy, making it the third largest in the world, making the industry the largest debt burden in the world as a result of decades of massive pump-prime spending.