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Japan tax income to hit record high in FY2017; budget-balancing goal elusive: sources
[TOKYO] Japan's Ministry of Finance is set to project tax revenue to hit an all-time high of 62.6 trillion yen (S$767.3 billion) in the fiscal year from April 2017 and reach around 70 trillion yen in five years, to help narrow a budget deficit, sources told Reuters.
The higher tax revenue projections take into account the planned sales tax rise to 10 per cent from the current 8 percent in April 2017 and economic growth, which will reduce new bond issuance to a nine-year low of 33.7 trillion yen in fiscal 2017, the sources said on condition of anonymity because the plan has not been submitted to parliament for debate.
New bond issuance is expected to rebound from the following year and reach 36.1 trillion yen in fiscal 2020 due to the cost of servicing accelerating public debt and rising welfare spending for a fast-ageing population, underscoring the need for further fiscal reform.
As a result, even on the rosy assumption that the economy grows 3 percent, the gap between spending and tax income is estimated at 5.8 trillion yen in fiscal 2020, making the government's goal of balancing the budget in five years appear elusive.
Under a modest assumption of economic growth at 1.5 per cent, the ministry estimates tax revenue at 61.6 trillion yen in fiscal 2017 and 65.1 trillion yen in fiscal 2020, which would result in a wider budget deficit of 8.4 trillion yen that year.
The outstanding government debt is estimated at 916.52 trillion yen in fiscal 2020 and is expected to top 1 quadrillion (1,000 trillion) yen in fiscal 2024, the sources said.
The annual projections will be presented to parliament when it starts debating the government's draft annual budget later this week.
The parliament approved on Wednesday a 3.3 trillion yen extra stimulus budget for this fiscal year.
Prime Minister Shinzo Abe has pledged to bring the country's primary budget balance into the black by fiscal 2020 in a bid to rein in public debt which is more than double annual economic output - the world's heaviest debt burden.
But the target looks elusive even under the government's rosy assumption that the economy grows nominal 3 per cent and real 2 per cent on average in the coming years.