Japanese government calculations indicate that Prime Minister Shinzo Abe cannot meet his budget-balancing promise in coming years on the current course, suggesting he may come under greater pressure from fiscal hawks for future tax increases.
Forecasts by the Finance Ministry, reviewed by Reuters on Friday, show that even in the rosiest of four scenarios, the government will run a primary budget deficit – which excludes debt service and income from debt sales – for the fiscal year to March 2021.
Under existing policy, Abe’s government has promised to halve the primary deficit by fiscal 2014/15 and bring it into balance five years later. Finance Minister Taro Aso reaffirmed that goal on Friday at the opening of Parliament.
Private economists have long considered the government’s fiscal-reform goals to be ambitious, but the new forecasts represent the first time that official figures have essentially confirmed that view.