Bowing to Reality: Japan's Budget Goal Is Being Deferred Again

(Bloomberg) -- One of Japan’s key targets for addressing its ballooning debt is set to be pushed further into the future when the Cabinet Office updates economic forecasts next week.

The primary balance, which measures the government’s fiscal position excluding interest payments on its borrowings, was meant to come out of the red in fiscal 2020. Reaching the goal was seen as a first step for Prime Minister Shinzo Abe’s administration to arrest debt growth, so the country could then begin to whittle it down.

Yet a best-case projection for a primary balance surplus was reset to 2025 in a revision last year and now it’s going to be deferred again, until sometime in the late 2020s, according to an official who asked not to be named, citing government policy. The Nikkei newspaper reported 2027 as the likely year.

With Japan’s public debt burden at about 240 percent of gross domestic product -- the heaviest burden of any developed nation -- a lot is at stake.

The aging population makes controlling spending on social welfare and health care a perennial challenge, and as the population shrinks the country’s debt per capita is steadily increasing. The budget for the fiscal year starting this April reached a record 97.7 trillion yen ($885 billion).

The question is, will the new forecasts be any better? The government’s estimates to date have all fallen short.

The Cabinet Office is expected to provide the new forecast on Jan. 23. Finance Minister Taro Aso has said the government will produce a new road map this summer for reaching a primary balance surplus.

To contact the reporters on this story: James Mayger in Tokyo at jmayger@bloomberg.net, Connor Cislo in Tokyo at ccislo@bloomberg.net, Maiko Takahashi in Tokyo at mtakahashi61@bloomberg.net.

To contact the editors responsible for this story: Brett Miller at bmiller30@bloomberg.net, James Mayger

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