TOKYO: Japan will reduce its planned issuance of government bonds for fiscal 2015 by about 450 billion yen ($3.63 billion) as part of efforts to improve the nation’s primary balance.
The cut from the initially planned 36.9 trillion yen in Japanese government bonds is part of the supplementary budget proposal that the cabinet will consider in mid-December. Greater-than-expected tax revenues will enable the reduction.
The proposed supplementary budget of 3.3 trillion yen sets aside 1.2 trillion yen for programs to promote citizen engagement. Low-income pensioners would receive 30,000 yen each, and funding for elderly care facilities would be increased.
About 300 billion yen would go toward domestic measures for the Trans-Pacific Partnership trade agreement. Funds will be created to improve the competitiveness of agricultural and livestock farmers in Japan. About 500 billion yen is to be allocated for disaster response including heavy rains.
Fiscal 2015 tax revenue is seen reaching 56.4 trillion yen, topping expectations by 1.9 trillion yen. The tally is the third highest ever, trailing only fiscal 1990 and fiscal 1991.
Income-tax revenue increased more sharply than anticipated thanks to taxpayers receiving more dividend payouts. Corporate tax revenues are also seen rising on brisk earnings. The additional tax revenues and a 2.2 trillion yen carry-over from fiscal 2014 will finance the supplementary budget.
JGB issuance was reduced by 750 billion yen from initial plans in fiscal 2014 as well. The last time such cuts were made midyear for two straight years was fiscal 2005-06. Shinzo Abe became prime minister for the first time during this period, succeeding Junichiro Koizumi. Under the fiscal 2012 supplementary budget, Abe’s government secured 10 trillion yen in funds by issuing an additional 5 trillion yen in JGBs.
The latest proposal lowers estimates of non-tax revenue by 350 billion yen from the initially projected 5 trillion yen, reflecting a regulatory change that lets the Bank of Japan set aside interest income from JGBs as an allowance for losses.
The government has set a target of lowering Japan’s primary deficit — which gauges how much of government spending is covered by tax revenue — to 3.3% of gross domestic product in fiscal 2015. A bigger supplementary budget was expected to make the target tougher to achieve. But the goal may be reached thanks to tax revenue growth and the reduced JGB issuances.
