TOKYO (MNI) – The Japanese government said Friday that its primary
budget deficit for the central and regional governments is estimated to
total Y17.6 trillion in fiscal 2020, or 3.1% of nominal GDP, down from
the 4.2% of GDP it predicted in January.

But the government still cannot say when it is likely to balance
the budget.

In order to achieve a primary fiscal balance by fiscal 2020 through
tax hikes alone, Japan would need to raise the 5% consumption (sales)
tax by 7 percentage points to 12%, the government said.

A sales tax increase by a full percentage point is believed to
generate additional annual tax revenue of around Y2.8 trillion.

The primary fiscal deficit — the budget deficit excluding both
debt-servicing costs — is projected by the government to total Y15.4
trillion in fiscal 2015, or 3.0% of GDP, down from its 4.2% forecast in

This indicates Japan may be able to halve its fiscal 2015 primary
deficit from the 6.0% of GDP seen in fiscal 2010.

The latest projection is based on the assumption that nominal GDP
growth will rise an average of 1.5% to 1.9% in a period up to fiscal
2020, the consumption tax rate will be hiked to 10% by fiscal 2015, and
taxes will be raised to finance the Y10 trillion program to rebuild
earthquake-hit northeastern regions of the country.

The outstanding balance of public debt issued by both the central
and regional governments is expected to exceed 200% of GDP in fiscal
2018 (203.1%), and top Y1,000 trillion in fiscal 2016 (Y1,020.8
trillion), the projection showed.

In a more optimistic scenario, Japan’s primary balance deficit
would be limited to 2.0% of nominal GDP in fiscal 2015 and to 1.4% in
fiscal 2020 if nominal GDP grows at around 3% each year.
** Market News International Tokyo Newsroom: 81-3-5403-4838 **

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