Japan sees primary budget surplus delayed to 2028 due to virus impact - sources
(Adds detail, context on fiscal policy)
By Yoshifumi Takemoto
TOKYO, July 16 (Reuters) - Japan now expects to achieve a primary budget surplus in the fiscal year 2028, one year later than previously estimated due to fallout from the coronavirus crisis, three government sources with direct knowledge of the matter told Reuters on Thursday.
The delay comes as Japan's massive fiscal stimulus to mitigate the economic damage from the outbreak has further eroded its tattered public finances.
The government had previously expected to bring the primary budget balance, excluding new bond sales and debt servicing costs, to a surplus in the 2027 fiscal year.
Deterioration in Japan's fiscal health would underscore a challenge for policymakers as they try to pull the world's third-largest economy out of a sharp slump, while wrestling with the industrial world's heaviest public debt burden.
It could also keep the Bank of Japan under pressure to maintain ultra-low interest rates for a prolonged period, as it prints money to buy government debt under its yield curve control policy.
In compiling the projections, the government has prepared around four scenarios, which were based on two assumptions that the pandemic would either end quickly or be prolonged, with each of them assuming either high growth or a base-line case, they said.
Even under its most optimistic scenario, the government would have to delay the timing to balance the budget by one year to fiscal 2028, the sources said on condition of anonymity because they were not authorised to speak to media.
In its draft policy roadmap out last week, the government left out any explicit mention of the fiscal 2025 primary budget surplus goal, raising speculation Tokyo may be backing away from fiscal reform. (Reporting by Yoshifumi Takemoto; Writing by Tetsushi Kajimoto; Editing by Ana Nicolaci da Costa and Kim Coghill) ((firstname.lastname@example.org; +81-3-4563-2731;)) Keywords: JAPAN ECONOMY/BUDGET (UPDATE 1)
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