TOKYO (Reuters) - Japan’s government needs to set a new time frame for achieving its budget-balancing goal, currently set at fiscal 2020/21, Finance Minister Taro Aso said on Tuesday.
He made the remarks a day after Prime Minister Shinzo Abe announced he would redirect some revenue from a planned sales tax hike in 2019 to child care and education rather than paying back public debt, in a bid to overhaul the social security system.
Abe admitted that would make it difficult to meet the government’s aim of balancing the budget - excluding debt-servicing costs and new bond sales - by the year ending in March 2021.
“It’s clear the primary balance is hard to achieve by fiscal 2020, so we’ll need to adjust for that and set an appropriate (new) goal, say 2022, 2023, though we have not calculated yet,” Aso told reporters after a cabinet meeting.
A primary budget balance is a key gauge of measuring how spending on policy measures is financed without relying on debt.
Balancing the budget is seen as a crucial step to rein in the world’s heaviest public debt burden at twice the size of Japan’s economy.
Some analysts say the delay will weaken fiscal discipline, which could cause the government to pile pressure on the Bank of Japan to prolong monetary stimulus to keep borrowing costs ultra-low, which effectively help finance government debt.
Aso also said it was worth considering measures to encourage companies to spend their cash pile on boosting wages and capital expenditure.
“It’s common sense that such (abundant) cash should be used for (boosting) wages, capital expenditure and dividends. It’s abnormal that labour’s share of corporate income has become very low.”
The government was considering introducing new tax breaks aimed at encouraging companies to boost wages and accelerate capital expenditure to spur economic growth, government and ruling party sources told Reuters last week.
Reporting by Tetsushi Kajimoto; Editing by Chang-Ran Kim and Kim Coghill