By Tetsushi Kajimoto
TOKYO (Reuters) – Japan may need more time to meet its budget target of achieving a primary balance surplus by fiscal 2025, Finance Minister Taro Aso said on Tuesday, while stopping short of abandoning the elusive target.
Some contenders in the ruling Liberal Democratic Party’s (LDP) leadership race have been cautious about the primary balance goal given uncertainty over the impact of COVID-19 on the economy.
A winner of the race is effectively assured to become a new prime minister given the ruling bloc’s majority in the powerful lower house of parliament.
“It’s true that we are facing a situation where more time may be needed to achieve the primary balance target,” Aso told reporters after a cabinet meeting. He declined to comment on remarks by the contenders running in the LDP race.
On the other hand, Japan’s tax revenue has grown despite the pandemic’s impact on a fragile economy, making it hard to foresee the fiscal outlook, Aso said.
He said he had no idea how much more fiscal spending the coronavirus may require.
“It’s important to strike a right balance between revenue and expenditure,” he said.
The primary budget balance, which excludes new bond sales and debt servicing, serves as a barometer to determine whether Japan can finance its expenditures with tax revenue without resorting to new borrowing.
Japan has pushed back the primary balance target several times in the past due to rounds of heavy fiscal stimulus it has rolled out to weather economic downturns.
Many private-sector analysts see the fiscal 2025 target as difficult, if not impossible, to meet.
The government’s own projections suggested in July the expected timing for achieving a primary balance surplus would be 2027 – two years earlier than the previous estimates due to a surprise rise in tax revenue.
(Reporting by Tetsushi Kajimoto; Editing by Ritsuko Ando and Stephen Coates)
