Japanese Deficit Expected to Shrink in 2015

January 6, 2015 Share Print 0

On the back of growth in tax revenue amid improvement in corporate profits, the deficit in Japan’s primary balance is expected to shrink to around ¥14 trillion in fiscal 2015 starting April 1, according to Finance Ministry sources.

A fall in the deficit suggests that Prime Minister Shinzo Abe’s Cabinet is likely to achieve its key fiscal rehabilitation goal of halving the ratio of the primary balance deficit to gross domestic product by fiscal 2015 from the fiscal 2010 level.

To attain that target the government said, in a medium-term fiscal reform plan crafted in 2013, it should slash the primary balance deficit to about ¥15 trillion in fiscal 2015.

A deficit in the balance means the country cannot finance government spending other than debt-servicing costs without issuing new bonds. An improvement in the balance is viewed as a critical first step toward fiscal consolidation.

But it will be difficult for Abe to restore the nation’s precarious public finances, given that social security costs, which account for 40 percent of Japan’s policy spending, have increased by ¥1 trillion annually due to a rapidly graying population.

In the next fiscal year, central government tax revenue is estimated to total nearly ¥54 trillion, the highest level in 22 years, the sources said.

via Japan Times

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Alfonso Esparza

Senior Currency Analyst at Market Pulse

Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.