Japan govt: fiscal targets slip further as tax revenue falls

TOKYO (Reuters) - Japan's government said on Wednesday that the primary deficit will worsen in coming years, even according to its most optimistic forecasts, because of falling tax revenue and weak consumer spending.

The forecasts, released by the Cabinet Office, show the government is falling behind two important fiscal discipline targets that were intended to eliminate the primary deficit, which excludes debt servicing costs and new bond sales.

Chances for a turnaround are slim, some economists say, because Prime Minister Shinzo Abe last year shifted policy to prioritise infrastructure spending over fiscal discipline, raising concerns that Japan's debt burden will worsen further.

Japan's primary deficit will total 8.3 trillion yen ($73.1 billion), or 1.4 percent of nominal gross domestic product in fiscal 2020, the Cabinet Office said on Wednesday.

In its previous forecasts published in July, the Cabinet Office said the primary deficit would be 5.5 trillion yen, or 1.0 percent of GDP, in fiscal 2020.

In fiscal 2018 the primary deficit will total 13.8 trillion yen, or 2.4 percent of GDP, worse than previous forecasts of 10.5 trillion yen and 1.9 percent, respectively.

Abe's government inherited a plan to achieve a primary surplus in fiscal 2020 to show Japan is trying to lower its debt burden, which is the worst among major countries at more than twice the size of its economy.

Abe's government set an interim target of reducing the primary deficit to 1 percent of gross domestic product in fiscal 2018, but economists widely expect the government to miss this goal after Abe delayed a nationwide sales tax increase.

Sources told Reuters last week the government could start debating whether to revise the target for fiscal 2020 because it was becoming less likely to be met. [nL4N1F82IH]

($1 = 113.5600 yen)

(Reporting by Stanley White; Editing by Jacqueline Wong)