Japan must plug over 20 tril. yen hole to meet FY 2020

austerity goal

Tokyo, Jan 21 (Kyodo) The Japanese government said todaythat it will have to plug a revenue shortfall of more than USD241 billion if it is to achieve a key goal for Japan''s fiscalrehabilitation in the year through March 2021.

In a "conservative scenario," the Cabinet Office said thecountry will need to secure about USD 279.5 billion in orderto realize a primary balance surplus in fiscal 2020 as pledgedby the government in June, when it forecast that the shortfallcould be around USD 261.45 billion.

The new estimate was released at a time when PrimeMinister Naoto Kan is widely seen as leaning toward raisingthe consumption tax to help finance the nation''s swellingsocial security costs.

If the government is to cover the shortfall only with revenuesfrom the politically sensitive sales tax, then its rate wouldhave to rise to around 14 percent from the current 5 per cent.

A primary balance surplus means the country can financeall of its expenditures, except for debt-servicing costs,without issuing new debt.

Japan''s deficit in the primary balance is expected toamount to 6.5 per cent of its nominal gross domestic productin fiscal 2010, which ends in March. Under the fiscalrehabilitation plans set in June, the governmentaims to halve the deficit-to-GDP ratio by fiscal 2015 andachieve a surplus in fiscal 2020.

The conservative scenario estimates the economy willexpand by an average of around 1.5 per cent in nominal termsannually through fiscal 2020. (Kyodo)