Japan to review assumed growth for fiscal projections

December 16, 2017

Tokyo- The Japanese government is set to consider reviewing its economic growth assumptions used as a basis for projecting medium- to long-term economic and fiscal performances for the entire country and local communities, Jiji Press learned Friday.

Taking present economic conditions into account, the government is expected to study options including creating a third scenario on top of the current high-growth scenario assuming the economy's revival and the low-growth baseline scenario, and lowering the assumed growth in the rosier scenario, according to informed sources.

The government plans to show new growth assumptions next month based on discussions by experts, the sources said. The medium- to long-term economic and fiscal projections are compiled twice a year.

At a meeting of the Council on Economic and Fiscal Policy, to be held shortly, private-sector members of the blue-ribbon government panel, including Gakushuin University Prof. Motoshige Ito, are poised to propose a review of the government's economic growth assumptions, the sources said.

Based on the possible new assumptions, the government hopes to adopt in summer 2018 a new target year for the nation to turn around its primary budget balance to a surplus, the sources said. A primary budget surplus means that the country's revenue, excluding from debt issuance, surpasses expenditures other than debt-servicing costs.

Earlier this year, the government postponed its target of achieving a primary surplus in fiscal 2020 in line with its decision to use part of the revenue from the planned consumption tax hike to 10 percent from 8 percent in October 2019 for measures including a free education program instead of debt repayments.

The current economic revival scenario assumes medium- to long-term economic growth of 2 percent or higher in price-adjusted real terms and 3 percent or higher in nominal terms, while baseline scenario assumes real growth of slightly below one percent.

In fiscal 2013 to fiscal 2016, Japan's annual real economic growth stood at 1.1 percent on average. Given the sluggish performances, the government will consider the possibilities of lowering the assumed growth in the economic revival scenario and introducing a third scenario that is more optimistic than the baseline case but weaker than the economic revival scenario, the sources said. Jiji Press