Image Credits: Republic World
The Japanese government has projected a primary budget surplus of approximately ¥800 billion for fiscal year 2025, which begins next April. This announcement marks a significant milestone in Japan’s ongoing efforts to stabilize its fiscal position.
The forecast, presented at a meeting of Prime Minister Fumio Kishida’s Council on Economic and Fiscal Policy, reflects an anticipated rise in tax revenue driven by robust corporate earnings, coupled with a moderation in expenditure growth following extensive stimulus spending in recent years. The central government’s estimate underscores its commitment to fiscal responsibility and economic reform.
Achieving a primary budget surplus would be a historic first for Japan, following the ambitious target set by then-Prime Minister Junichiro Koizumi in the early 2000s. This milestone comes after decades of fiscal deficits, which have been largely attributed to declining tax revenues and substantial government spending in response to economic downturns since the collapse of Japan’s asset-driven bubble economy in the early 1990s.
The government’s projection includes two economic growth scenarios: one where the economy expands at a stable rate exceeding 1% and another where growth remains around 0.5% in the medium to long term. Under both scenarios, the government expects the primary surplus to persist at least until fiscal 2033, provided no additional economic stimulus measures are introduced.
The aim is to progressively reduce the ratio of Japan’s outstanding debts relative to its gross domestic product (GDP). If the economy continues to grow at a rate exceeding 1%, this debt ratio is projected to decrease from 211.0% in fiscal 2022 to 168.9% by fiscal 2033. Conversely, if growth remains subdued at around 0.5%, the debt ratio is expected to fall more gradually to 196.0% by fiscal 2028, potentially rising again if growth does not improve.
Prime Minister Kishida emphasized the ongoing need for spending cuts and structural reforms to sustain this fiscal trajectory. The projected surplus, if realized, would not only signify a critical step towards fiscal consolidation but also reflect Japan’s broader economic recovery and reform efforts.