Japan is expected to fall short of its target to achieve a primary budget surplus by the next fiscal year, according to three sources familiar with new fiscal estimates. This update, set to be released later this week, contradicts the government’s forecast from July 2024, which had projected the country would reach the surplus for the first time since the goal was set in the early 2000s.
The sources, who requested anonymity due to the confidential nature of the information, indicated that Japan’s mounting fiscal challenges are exacerbated by increasing pressure for higher public spending, particularly as the minority government grapples with a loss of parliamentary majority.
With national debt exceeding double the size of Japan’s economy, the government faces an urgent need to address its fragile public finances. The challenge is made even more difficult as the Bank of Japan begins to scale back its decade-long ultra-loose monetary policy, which had kept borrowing costs near zero.
In response to growing political pressure, Prime Minister Shigeru Ishiba’s government was forced to compile an additional budget, amounting to 13.9 trillion yen ($88.06 billion), late last year to satisfy both voters and opposition demands.
The primary budget balance, a key indicator that excludes bond sales and debt servicing costs, reflects the government’s ability to finance policy measures without further increasing debt. Japan has repeatedly delayed the target date for achieving a surplus as fiscal challenges persist.
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