Exclusive:Japan government forecasts show Abe missing budget-balance promise

TOKYO Fri Jan 24, 2014 6:24am EST

Japan's Prime Minister Shinzo Abe makes a policy speech during the start of an ordinary session at the lower house of the parliament in Tokyo January 24, 2014. REUTERS/Yuya Shino

Japan's Prime Minister Shinzo Abe makes a policy speech during the start of an ordinary session at the lower house of the parliament in Tokyo January 24, 2014.

Credit: Reuters/Yuya Shino

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TOKYO (Reuters) - Japanese government calculations indicate that Prime Minister Shinzo Abe cannot meet his budget-balancing promise in coming years on the current course, suggesting he may come under greater pressure from fiscal hawks for future tax increases.

Forecasts by the Finance Ministry, reviewed by Reuters on Friday, show that even in the rosiest of four scenarios, the government will run a primary budget deficit - which excludes debt service and income from debt sales - for the fiscal year to March 2021.

Under existing policy, Abe's government has promised to halve the primary deficit by fiscal 2014/15 and bring it into balance five years later. Finance Minister Taro Aso reaffirmed that goal on Friday at the opening of Parliament.

Private economists have long considered the government's fiscal-reform goals to be ambitious, but the new forecasts represent the first time that official figures have essentially confirmed that view.

"Abe will either have to get serious about spending cuts or raise taxes more than originally planned," Norio Miyagawa, senior economist at Mizuho Securities Research & Consulting Co, said of the new ministry forecasts.

"However, there's reason to be concerned because Abe's comments suggest that as long as higher economic growth pushes up tax revenue he would like to avoid the unpopular option of raising taxes."

Ministry officials had no comment on the scenarios, which have not been made public.

Fiscal reform is an urgent task for the world's third-biggest economy. Years of recessions and tepid growth have crimped tax revenues, while massive government stimulus measures and a rapidly ageing society have forced up government spending.

The result is public debt far above 200 percent of GDP, the biggest burden in the industrial world. A Reuters survey of 400 companies on Friday found that 80 percent expect a euro-style debt crisis in Japan in the next decade.

Abe last year took the biggest step in 15 years to rein in Japan's debt, deciding to raise the national sales tax to 8 percent from 5 percent in April.

SCENARIOS

The new ministry documents, to be used in budget debates in the next session of Parliament from next week, show that the tax increase and the boost to growth from "Abenomics" mean the government is now ahead of initial projections for halving the primary deficit in the first stage.

But the new initial projections for the fiscal 2020/21 target year depict Japan's inexorable budget and demographic trends swamping the government's fiscal goals.

Even assuming robust annual economic growth of 3 percent and further steps to rein in social security spending, Japan will run a primary deficit of 6.6 trillion yen ($64 billion), or 1.1 percent of GDP, in the 2020/21 fiscal year, the ministry calculates.

With a more typical growth rate of 1.5 percent, the deficit widens to 9.1 trillion yen.

If no steps are taken to curb the natural increase in welfare spending, the ministry calculates, Japan will run a deficit that year of 9.1 trillion yen if growth is 3 percent, ballooning to 14.1 trillion yen at 1.5 percent growth.

For the current fiscal year through March, the deficit is 23.2 trillion yen, or 4.8 percent of GDP.

The forecasts assume that Abe will proceed with a further sales-tax increase, to 10 percent, in October 2015, although confirming that hike promises to be a politically contentious for the premier and is by no means certain.

Given that Japan is on course to remain in deficit even if it curbs spending, the forecasts may mobilize ministry fiscal hawks to push for Abe to ratify the next tax hike, fend off calls for corporate tax cuts and even look for further revenue increases.

(Additional reporting by Tetsushi Kajimoto and Stanley White; Writing by William Mallard; Editing by Neil Fullick)

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Comments (1)
Bobsmith20 wrote:
Abenomics consists of militaristic goals first and foremost with outrageous disregard of truth, morality, democracy, human rights.

How did Abe achieve this feat? By outright bribery.

Like his typical wolf-self, Abe calculated the most egregious CURRENCY MANIPULATION TO BRIBE Putin by 25% depreciation of Yen, while deliberately refusing to develop other forms of alternative energy source. Why is that bribe? Abe forced Japanese citizens to sustain a huge increase of energy imports after the closing of nuclear plants, choosing to pay Putin a price and quantity that Putin never dreamed of. In return, Abe asks Putin to reverse the objectively rational, and historically reasonable stance of Medvedev. Putin ignored the vehement demonstrations of Russians against the prospect of Japanese rule, and changed his stance.

How does that fit into Abenomics? The carefully crafted increase in energy cost, particularly inflated by a self-induced 25% currency manipulation allows Abe to twist the arms of Japanese voters to grudgingly agree with keeping nuclear energy despite the immense suffering of the Fukushima residents and overwhelming distrust of Japanese people that their Government was telling the truth.
The purpose of keeping nuclear energy can then be ostensibly attributed to the lack of alternative energy sources and high energy prices. (In fact, both were problems artificially accentuated by Abenomics.) The REAL agenda of ABE is to militarize Japan in the militaristic glory of his grandfather who was in Toga’s WWII cabinet and was the official ally of Adolf Hitler. To revise that glory was the real goal, economics was the cover up.

The 3 goals of Abenomics were:
1. Mislead the Japanese people that nuclear energy was necessary because the cost of energy from Russia was so high, while creating a smokescreen that its nuclear pursuits are, unlike Iran, entirely peaceful.
2. Create Machiavellian type allies against the victims countries of Japanese WWII war crimes, for which Japan has not only mostly denied, but ACTIVELY HACK, HARASS, DEFAME, AND SABOTAGE ANY HONORABLE HUMAN RIGHTS DEFENDER WHO DOCUMENTS FACTS AND HISTORY OF ACTIVE ONGOING JAPANESE COVER UP OF WAR CRIMES
3. Create a fake image to ordinary Japanese voters that its pursuit for territories, from EVERY one of its previous immediate neighboring victims of war aggression, are justified, by financial bribes paid for by the damage to American, Korean and European and Chinese economies.

1. Mislead the Japanese people that nuclear energy was necessary for a healthy Japanese economy when in fact it places the economic condition in the second, if not third or fourth priority relative to militarism. Why? Abe wanted to make sure that it retains nuclear capability so that it could quickly (or secretly, if deemed necessary in the future) create its own nuclear bomb.

Furthermore, it seeks to create an array of allies based on the pretense of providing nuclear energy for Arab nations, including Saudi Arabia, Turkey, (partly with the eye of curtailing Israel and China, and, behind the scenes, foment dissent against the United States, i.e., the World War II allies which liberated the world).

The most egregious trick Abe used was to turn off air conditioning for Government buildings in the middle of summer— of course, voters had to choose to agree with nuclear energy —- hence, the carefully manicured poll results which are disseminated as propaganda by Stanford Japanese research fellow as if it is objective— ALL to fool the world.

2. Japan continues to violate international laws, including against American citizens who are victims of Japanese war crimes, and still unable to simply tell their family stories without egregious, unremitting, relentless harassment, death threats— recently accentuated by the assistance of the outsourcing of NSA transfer of intellectual property that belongs to Silicon Valley —- BIG MISTAKE BY OBAMA, KERRY, AND HAGEL. This was secretly sneaked in by a betrayal of interests of American citizens in the name of fighting Chinese aggression, which was a myth that had been carefully crafted by the far right AND by Abe and his LDP, in order to convince the United States to transfer trillions worth of intellectual property — WHICH HAS BEEN USED AGAINST INNOCENT LONGSTANDING VICTIMS OF JAPANESE AGGRESSION AND DEFAMATION ON AMERICAN SOIL.

BIDEN who think they might capitalize on these Japanese tricks are getting their interests sold out while naively believing that the Japanese Abenomics would really “benefit” European and American economies!!!!! No. It benefits those who still remain reminiscent about the economic benefits of imperialism to their countries, so much so that as they are lulled into the fake dreams, they forget how their products ( French and American cars, for example) were suddenly 25% more expensive than the Japanese cars they are competing against—- neither Obama, Hollande, Cameron is a vigilant guard of the economic interests of their countries because they are BRIBED by Abe’s guileful caricature that what Japan is doing is actually “beneficial” to these countries merely because of the shared nostalgia for historic economic benefits from colonization or “looking towards the Sun” concept of conquering lands in the wild west from the Native Americans and then towards Asia.

Obama, Hollande, Cameron, Saudi Arabia and Turkey will soon learn that they are fools to believe in Abe’s charming offensive, lure of militaristic glory— they should study history and remind themselves which country was fooled into such a trap and eventually suffered a sneak attack at Pearl Harbor. They have been fooled by Japan into turning against themselves without realizing the strings of so many puppets were pulled by Abe’s guile.

The most endangered, potential preys are the Japanese people. They are at serious risk, particularly the young naive Japanese voters who had never heard the horrors of war their own family ancestors, and the PTSDs their ancestors suffered, as well as the war victims all around the world suffered.

Truth will come out, hopefully not too late for the world.

Jan 24, 2014 3:59pm EST  --  Report as abuse
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