Japan unlikely to achieve surplus by next fiscal year

Japan may not achieve its goal of running a primary budget surplus by the next fiscal year, as per sources familiar with new fiscal estimates, due to pressure on the minority government to increase spending.

The upcoming estimate, set to be revealed this week, revises the government’s previous forecast from July last year of achieving a primary budget surplus by the fiscal year starting in April. This would have been the first surplus since the goal was set in the early 2000s.

Japan urgently needs to address its high debt levels, which are more than double the size of its economy. This is crucial as the Bank of Japan is scaling back its long-standing ultra-loose monetary policy, which has kept borrowing costs low for the past decade.

The ruling coalition’s loss of a parliamentary majority has increased pressure on Prime Minister Shigeru Ishiba’s government to increase the budget to satisfy voters and the opposition. As a result, an extra budget of 13.9 trillion yen ($88.06 billion) was compiled late last year.

The primary budget balance, excluding new bond sales and debt-servicing costs, indicates how much policy measures can be funded without issuing debt. The target surplus dates have been delayed multiple times.

Attribution: Reuters

Subediting: M. S. Salama