Japan will not meet its goal of reaching nominal gross domestic product of 600 trillion yen ($5.7 trillion) in fiscal 2020, and may not achieve it even by fiscal 2024 if growth stays sluggish, the government’s projections showed on Tuesday, adding pressure on policymakers struggling to revive the economy.
The world’s third-largest economy now expects nominal GDP of 551 trillion yen in the fiscal year beginning in April 2020 assuming the current pace of growth, the Cabinet Office said.
Japan also expects to have a primary deficit of 9.2 trillion yen if growth remains weak, and to fail to reach its target of a primary budget surplus even in fiscal 2024.
The forecasts assume mid- to long-term real economic growth of 1% or less, but do not take into account a massive stimulus package expected this autumn, the Cabinet Office said.
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Japan has repeatedly retreated further from its ambitious goal of boosting nominal GDP to 600 trillion yen. Despite Prime Minister Shinzo Abe’s “Abenomics” recipe of massive monetary easing, fiscal stimulus and structural reforms, the government has revised down its nominal GDP forecasts three consecutive times since Abe returned to power in late 2012.
Nominal GDP for fiscal 2020 was previously forecast to be 620.7 trillion yen in August 2013 – a target that now seems practically unreachable.
Abe, however, remains optimistic. He told reporters after a meeting of the Council on Economic and Fiscal Policy, the government’s advisory panel, that Japan will work toward achieving its 600 trillion yen GDP target through reforms in spending, and added that it is sticking to its goal of reaching a primary budget surplus in fiscal 2020.
Even under a rosy scenario that assumes economic growth would pick up, Japan is set to miss its GDP target and its goal of achieving a primary budget surplus in fiscal 2020.
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Assuming real economic growth of 2% or more, Japan still sees nominal GDP of 582.7 trillion yen in fiscal 2020, and a primary budget deficit of 5.5 trillion yen, the Cabinet Office said.
“We will firmly proceed with fiscal reform step by step,” Economy Minister Nobuteru Ishihara told reporters after the government panel meeting.
The primary budget, which excludes debt servicing costs and income from bond sales, is a key measure of fiscal health. In June, the prime minister delayed a sales tax increase to October 2019 from next April because of growing risks to the economy — a step some economists worry would worsen Japan‘s fiscal discipline.