Budget deficit is an economical burden that all countries face within the year. It occurs when a government spends more than it makes. Japan recorded a government budget deficit equal to six percent of the country’s Gross Domestic Product in 2015. Government budget in Japan has had its ups and downs. However, in 2009, it has reached an all time low of -890 percent of GDP.

 

Prime minister Shinzo Abe is very clear and consistent when it comes to his economic policies. Abe had plans to increase taxes eight percent to ten percent. However, he kept on postponing the idea till 2019, which is when it is rumored to happen. The government’s goal right now is to eliminate budget deficit by 2020. Now, if we take a look at Japan’s economy for the past two decades, we will surely realize that it has been growing at a robust pace. Unfortunately, after many calculations, Japan will still be short of the deficit target by 5.5 trillion yen, and if Japan happened to face a slower rate within the next couple of years, the deficit of national and local governments combined would top 9 trillion yen, according to the latest cabinet office statement.

 

Nevertheless, it is not all bad news for Japan! Under the fiscal 2016 budget proposal approved by the cabinet, Japan’s primary deficit, which excludes debts payments, totals 10.8 trillion yen which is the lowest it has ever been in nine years. Japan has been taking the right steps towards achieving their goal of a primary surplus in fiscal 2020. However, will they be able to pass the challenge?

 

Bank of Japan Governor Haruhiko Kurado came up with the statement in 2016 that it is very important for japan to keep its oath to achieve a budget surplus by 2020. He said “ The government has said it will turn its budget deficit into a surplus by fiscal 2020 and this point is important.”

 

To prevent Japan’s debt from becoming unhandable through spiraling interest rates, a primary budget surplus would be needed to prevent an explosion.

 

Japan has already been taking steps towards a budget surplus and by 2019 it is set that they will be increasing tax prices. Japanese Prime minister Shinzo Abe approved that they have been cutting new borrowing and in 2015 it was their third straight year in cutting borrowing in order to balance growth and fiscal reform.