Japan Govt Urged to Post Stable Budget Surplus by FY 2025

May 24, 2018

Tokyo- An advisory panel urged the Japanese government on Wednesday to generate a primary budget surplus on a stable basis by fiscal 2025 at the latest under a new fiscal reconstruction program.

The Fiscal System Council, which advises the finance minister, wants its proposals to be reflected in new economic and fiscal policy guidelines that the government plans to compile in June.

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 and the ruling camp, led by the Liberal Democratic Party, are now considering setting a goal of achieving a primary budget surplus in fiscal 2025, against the previous target of fiscal 2020.

The panel urged the government to raise the country's consumption tax to 10 pct from the current 8 pct in October 2019 as planned.

The panel also called on the government to maintain its fiscal discipline of the past three years until fiscal 2021 as social security costs are projected to surge due to the country's rapidly aging population and to study additional measures to increase revenue or cut spending if necessary.

As spending reforms measures, the panel proposed pushing back the starting age for receiving public pensions, from the current 65 in principle, and increasing the share of out-of-pocket medical expenses by people aged 75 years or over to 20 pct from 10 pct at present.

These proposals were presented to Finance Minister Taro Aso.

Meanwhile, informed sources said that the government plans to set interim goals, for fiscal 2021, for three gauges, including the proportions of the primary budget balance and outstanding debts to the country's nominal gross domestic product, under the new fiscal reconstruction program covering fiscal 2019-2025.

Specifically, the government will aim to lower the proportion of the primary budget deficit to around 1.5 pct from 2.9 pct estimated for fiscal 2018, which started last month, and that of outstanding debts to a range from 180 pct to below 185 pct, from 188 pct for fiscal 2018. It will try to reduce the proportion of the overall fiscal deficit, which also takes account of debt-servicing costs, to nominal GDP to less than 3 pct in fiscal 2021 from 4.4 pct for fiscal 2018, according to the sources.

The numerical targets will likely be set on condition that the planned consumption tax is carried out. Jiji Press