Japan deficit to continue in 2020 even if economy relaunched

Tokyo, Feb 10 (IANS/EFE) Japan will register a primary deficit in 2020 even if it increases its consumer tax and reactivates economic growth, according to government forecasts published Tuesday by the Japanese newspaper Nikkei.

In the current fiscal year, which ends in March, the deficit on the primary balance of Japan will reach more than $137 billion, or 3.3 percent of its gross domestic product (GDP), according to official calculations.

In the best expected scenarios, the deficit would be more than half, which is 1.6 percent of its GDP and far from the government's objective of exiting the numbers in red.

This estimate includes the further increase of the consumer tax, or VAT, to 10 percent which the government intends to implement in April 2017 and is based on a growth rate of Japan's economy at 3 percent annually, according to the data published by Nikkei.

In case the Japanese GDP grows at a rate of 1 percent, the deficit would remain at the current level by 2020.

These figures will be presented Thursday at a meeting of the Japanese Council on Economic and Fiscal Policy, again highlighting the need for additional measures to improve Japan's fiscal health and spur growth.

During this period, the negative balance of the primary balance of Japan will be higher than initially planned because of the government's decision to delay the new VAT increase.

Japanese Prime Minister Shinzo Abe chose to postpone the tax hike until 2017 so that Japan's economy would not suffer a fall in demand again.

The Japanese economy is in technical recession after the previous increase in VAT (from 5 to 8 percent) last April which sank domestic consumption, a mainstay of Japanese GDP.

The Japanese government plans to introduce next summer a new tax plan to obtain a surplus in its primary balance by 2020.

--IANS/EFE

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