Japan to keep budget surplus target despite pandemic

23 Jun 20

Japan will not change its target to return to a budget surplus by 2025, despite its huge fiscal efforts to counter the impact of Covid-19, its finance minister has said.

Two weeks ago, Standard & Poor’s Global Ratings lowered its outlook on Japan’s sovereign debt rating to ‘stable’ from ‘positive’, pointing to the government’s pandemic stimulus, which so far totals $2.2trn, and a projected deficit of 16% of GDP.

And although S&P affirmed Japan’s A+ long-term and A-1 short-term sovereign credit ratings, it warned that these could be reduced if growth remains low and deflation puts pressure on the government budget.

When asked about this today, finance minister Taro Aso said he believed a ratings downgrade can be avoided if the stimulus revives the economy and restores government revenue.

“We have no immediate plan to review the primary budget goal,” news agency Reuters quoted him as saying.

The goal will be included in the government’s mid-year policy platform, which prime minister Shinzo Abe will present in July.

A prior target of achieving a surplus by 2020 was pushed back in 2018. It does not include debt servicing costs or income from new bond sales.

It is hoped the target will signal the government’s commitment to fixing its huge public debt, which currently sits at more than twice that of the $5trn national economy.

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