Japan government pushing out balanced budget targets to mid-2020s - Reuters

As reported by Reuters, Japan's government is considering setting a new balanced budget target for around 2025, after the initial balanced budget target set by Prime Minister Shinzo Abe for 2020 was shelved.

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A final decision has yet to be made due to disagreements over how much social welfare should be curbed and concerns that spending cuts could derail the country’s economic recovery, according to the sources, who spoke on condition of anonymity as they are not authorized to speak to media.

The government’s original goal was to achieve a surplus in fiscal 2020. But Prime Minister Shinzo Abe shelved that deadline last year when he called a snap election with a pledge to revamp social welfare system for all generations.

The government will decide a new deadline in June for balancing the primary budget — which excludes debt servicing and new bond sales — with a timeframe sometime between fiscal 2023 and 2026.

Projections by the Cabinet Office showed in January that a primary budget surplus will be met in the 2027 fiscal year, meaning that spending reform would be needed to bring forward the target, the sources said.

That depends on how the government proceeds with painful reforms on welfare spending in the face of the need to respond to a rapidly aging population, highlighting the difficulty of restoring fiscal health as spending grows.

Investors are closely watching the government’s plans to balance the budget as Japan is already saddled with the industrial world’s heaviest public debt that is more than twice the size of its economy.