September 20, 2017 / 3:03 AM / a year ago

Japan PM Abe to delay timing of achieving budget balance target-sources

TOKYO, Sept 20 (Reuters) - Japanese Prime Minister Shinzo Abe is set to delay the timing for balancing a primary budget from the current fiscal 2020 to later in the decade, sources told Reuters on Wednesday, calling the government’s fiscal discipline into question.

Abe will unveil the decision on Monday at a news conference at which is he expected to announce a snap election, the government sources said on condition of anonymity because they are not authorised to speak to media.

Abe is expected to call the general election for Oct. 22 to take advantage of a rebound in his damaged approval ratings and disarray in the opposition, ruling party and government sources said.

The government has vowed to achieve the ambitious target of returning to a primary budget surplus in the fiscal year ending in March 2021, as a crucial step to rein in the world’s heaviest public debt burden at twice the size of Japan’s economy.

Now, Abe plans to push back the timing to sometime in 2020s while prioritising spending on education, innovation on human resources and productivity, the sources said, confirming an earlier report by the Nikkei daily and other domestic media.

A primary budget balance, which excludes new bond sales and debt servicing costs, is a key gauge of measuring how spending on policy measures is financed without relying on debt.

Abe has told reporters he will make a decision on the snap election after he returns from the United States on Sept. 22.

Abe wants to go ahead with a planned rise in the nation’s sales tax to 10 percent from 8 percent in 2019 and use some of the revenue to create a “social security system for all generations”, which would invest in education while decreasing the proportion of sales tax revenue used to pay down government debt, other sources have said.

Using less tax revenue to pay down debt, however, would make it more difficult to balance the budget.

“We have to maintain fiscal discipline, regardless,” Finance Minister Taro Aso told reporters on Monday when asked about reports of such a shift. (Reporting by Takaya Yamaguchi; Writing by Tetsushi Kajimoto; Editing by Kim Coghill)

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