Japan tax revenue sets another record amid weak yen, inflation
The extra tax revenue for the fiscal year stood at 851.7 billion yen, half of which is earmarked for defence spending
JAPAN’S tax revenues reached another record in the fiscal year ended in March, a positive outcome partly driven by the weak yen and sticky inflation.
Tax income for the latest fiscal year rose to 72.1 trillion yen (S$603 billion) from 71.1 trillion yen in the previous year, the Finance Ministry reported on Wednesday (Jul 3).
Income tax revenue slipped to 22.1 trillion yen from 22.5 trillion yen in fiscal year 2022, while corporate tax revenue grew to 15.9 trillion yen from 14.9 trillion yen.
The record tax revenues partly reflected the weak yen’s impact in driving corporate earnings for Japanese exporters including Toyota Motor, which posted record operating profit.
With the currency recently trading at levels near a 38-year low against the US dollar, exporters are poised to continue benefiting, while higher import costs for materials, energy and food will also pose challenges for manufacturers and consumers.
Inflation also contributed to improved performances of some businesses. A recent survey by Teikoku Databank indicated that more companies that were able to pass on higher costs to customers via price increases expected higher profits compared with last year.
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Pressure to lift prices is likely to persist given that Japan’s producer prices rose at the fastest clip in nine months in May.
The extra tax revenue for the fiscal year stood at 851.7 billion yen, half of which is earmarked for defence spending.
Amid escalating geopolitical tensions in Asia, Prime Minister Fumio Kishida announced plans in 2022 to double the military budget to 2 per cent of GDP by fiscal year 2028, utilising funds from tax hikes, expenditure reforms and the surplus.
The better-than-expected tax revenue may also raise questions about whether Kishida might consider implementing another tax rebate.
Following last year’s record tax receipts, Kishida announced a 40,000 yen tax rebate, describing it as a way to return the increased tax revenue to the people.
Government officials including Finance Minister Shunichi Suzuki have repeatedly maintained that such measures should be viewed solely as one-off actions.
Despite the revenue gains, Japan’s fiscal plight is severe. The nation shoulders the heaviest public debt burden among developed nations, with the amount expected to reach 1,105 trillion yen at the end of this fiscal year, equivalent to more than 250 per cent of gross domestic product, according to the International Monetary Fund.
Still, the Japanese government last month reaffirmed its commitment to balancing the budget by the fiscal year beginning in April 2026 in its recent annual policy plan. BLOOMBERG
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