Japan Aims to Attain Primary Budget Surplus in FY 2025

June 6, 2018

Tokyo- Japan aims to achieve a primary budget surplus in fiscal 2025, five years later than the previously envisioned fiscal 2020, according to a draft of the government's new economic and fiscal policy guidelines unveiled on Tuesday.

The draft guidelines were presented to the day's meeting of the Council on Economic and Fiscal Policy, headed by Prime Minister Shinzo Abe.

The government has dropped the old target year, as it will use part of the revenue from the planned October 2019 consumption tax hike to 10 pct from 8 pct for free preschool education and other measures.

To make sure that the primary budget balance is turned around to a surplus in the year from April 2025, the draft guidelines call for setting interim goals, for fiscal 2021, for three indicators. Specifically, the draft proposes lowering the proportion of the nation's primary budget deficit to gross domestic product to 1.5 pct, that of outstanding debts to GDP to a range from 180 pct to below 185 pct and that of the overall fiscal deficit to GDP to 3 pct or less.

The primary budget balance refers to the gap between revenue at the central and local governments, excluding from debt issuance, and spending other than debt-servicing costs.

The government hopes to formalize the guidelines at a cabinet meeting in mid-June.

"We'll clear the way for fiscal consolidation" by fiscal 2025, when all baby boomers are 75 or older, Abe stressed at the meeting.

Also in the draft, the government underscores the need for the "smoothing of demand fluctuation" to prevent an economic slowdown after the planned consumption tax rate hike.

The government plans to include funds for stimulus measures in its budgets for fiscal 2019 and fiscal 2020. "We'll flexibly take measures to curb economic swings as much as possible," Abe said.

For fiscal 2016 to fiscal 2018, the government has set a goal of limiting the growth in social security costs at around 500 billion yen each year. The target is likely to be met, thanks partly to cuts in government-set drug prices.

But the government is set to skip such a numerical goal for fiscal 2019 to fiscal 2021, due to a stalemate in talks between the Finance Ministry and the Health, Labor and Welfare Ministry.

The draft guidelines also include the establishment of a new immigration program to allow skilled foreign workers to live in Japan for up to five years in total, in response to deepening labor shortages in the country.

The government will consider lifting the upper limit for highly skilled specialist workers. Jiji Press