Japan delays planned budget surplus after coronavirus shock

31 Jul 20

Japan has pushed its budget surplus target back because of the impact Covid-19 has had on the government’s finances.


The government predicts it will run a primary budget surplus of 300bn yen (£2.16bn) in 2029-30, it revealed in its biannual round of projections – when in January it had predicted a surplus as soon as 2026-27.

This figure does not take into account new bond sales or the costs of servicing Japan’s massive public debt, which sits at around 240% of its GDP.

Officially, the government is still targeting a surplus by 2025-26, but prime minister Shinzo Abe made no mention of the target in his mid-year policy update earlier this month.

This target had already been pushed back twice, with the initial target being to achieve a surplus by 2017-18.

The pandemic has led to the government allocating stimulus measures worth £1.67trn, and officials expect a fiscal deficit of 16% of GDP this year.

Standard & Poor’s Global Ratings lowered its outlook on Japan’s sovereign debt in June, moving its rating from ‘positive’ to ‘stable’, and warned that its sovereign credit rating (which remained at A+ in the long-term and A-1 in the short term) could be reduced as well if growth remains low and deflation puts pressure on the budget.

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