A report released by the Cabinet Office shows that Japan will most likely not reach its debt reduction goal by fiscal year 2020. Even if the tax increase will happen as scheduled and despite the country’s current economic growth, the budget deficit reduction will still not be achieved by that time, the estimates show.
This report goes to show that despite the major changes introduced by Prime Minister Shinzo Abe‘s Abenomics, or his steps to economic growth stimulus, his administration still needs to come up with more strategies to improve the country’s fiscal health, considered the worst one among developed countries. When Abe took over in December, he committed to cutting into half the primary balance deficit in the country’s gross domestic product by 2015 and then turning the balance into a surplus by 2020. The optimistic scenario is that if the economy grows by an average of 3.0 % in nominal terms in the next decade, the primary balance deficit would be at 3.3% by 2015 and then 2.0% by 2020.
A medium-term fiscal reform plan was approved on Thursday, which is aiming to narrow Japan’s budget deficit by 17 trillion yen in the next two years. Abe has not yet reached a decision on whether to push through with the scheduled consumption tax hike according to the legislation enacted August of last year. The tax rate is set to be raised to 8% by August 2014 and then to 10% by October 2015. The decision will be made this fall if the first round will be implemented, as there has been some concerns that it will affect the growth being experienced right now, even as it is key to the financial reconstruction needed by the country.
[ via Global Post ]
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