Abe: Budget is a Record but Will Lead to Reduced Deficits for Japan

January 12th, 2015
in econ_news

Econintersect:  Japan's Prime Minister Shinzo Abe has proposed a record ¥96.3 trillion ($813 billion) budget for the next fiscal year starting 01 April 2015.  This is up from the current budget of  ¥95.9 trillion ($810 billion), an increase of 0.4%.  An expected surge in tax revenues from the second year of the new 8% consumption tax in a strengthening economy and the accompanying  higher corporate tax receipts are projected to reduce the government annual deficit by 10.6%, from ¥ 41.3 trillion to ¥36.9 trillion.

little-boy-suma-wrestler380x180

Follow up:

The 2015-16 fiscal year deficit will be, by Abe's projections, approximately 3% of GDP.  To get this number, according to Reuters, he is excluding Japan's debt service payments (about ¥23.5 trillion, or about 64% of the deficit).  This year the deficit will be about 8.5% of GDP including the debt service expenses (¥41.3 trillion deficit and GDP projected to be about  ¥486 trillion - Fed Fred data base).  Econintersect calculates that  the deficit for next year, including the debt service expenses, will be about 7.5% of GDP - if GDP grows by 1.5% for that year (to about ¥493 trillion) - and 7.6% if GDP does not grow at all.

Note: Trading Economics has the 2014 deficit at 7.6% of GDP.  In the text they identify this as the 2013 deficit (for the fiscal year ending 31 March 2014).  This is less than the 8.5% calculated with data from other sources for the current fiscal year.  If these numbers are all correct then Japan has had a serious degradation of the deficit for fiscal 2014 which ends in about 2 1/2 months (from 7.6% of GDP to 8.5%).  This occurred for a year with a big tax increase on the first day of the fiscal year.  So much for big tax increases to improve a fiscal budget, at least in this case.

japan-budget-deficit-2006-2014

japan-gdp-2006-2014

Sources:

  • Japan GDP (Trading Economics. 12, January 2015)

 

 









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