Japan budget surplus forecast delayed as fiscal reforms struggle

Japan has pushed back its budget surplus forecast twelve months. (Reuters)
Updated 31 July 2019
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Japan budget surplus forecast delayed as fiscal reforms struggle

  • Tokyo vows to balance budget by fiscal year 2025/26

TOKYO: Japan pushed back projections on Wednesday for bringing its budget into surplus, in a sign Prime Minister Shinzo Abe’s government is struggling to rein in massive public debt as the economy comes under increasing pressure.

The government pushed back its forecast of achieving a surplus by one year to 2027, citing a downward revision to its outlook for gross domestic product (GDP) growth, inflation and tax revenue since projections in January.

In its twice-yearly fiscal and economic projections, the government expected the primary budget, excluding new bond sales and debt servicing, to swing to a surplus of 0.2 percent of GDP in 2027.

In its January estimate, the government expected the primary budget balance to swing to a 0.1 percent surplus of gross domestic product in fiscal 2026.

Japan’s debt burden is the industrial world’s heaviest, at more than twice the size of its $5 trillion economy. Abe has put greater importance on growth to safeguard the fragile economy than fiscal reform.

Domestic demand has helped offset weaker exports this year, but a planned sales tax hike in October to 10 percent from 8 percent could curb consumer spending.

Abe voiced his readiness to boost fiscal spending if the tax increase hurts consumption.

“As we aim to achieve our fiscal reform target, we’ll do the utmost to steer economic and fiscal policy appropriately and flexibly,” Abe told government’s top economic council.

“We will respond as appropriate while watching to see any swings in demand after the tax hike, and the most up-to-date economic situation.”

Weak external demand forced the government to lower economic growth forecasts from the January estimate. It now expects real and nominal GDP growth at 2 percent and above 3 percent, respectively, from fiscal 2023, which many private-sector economists see as rosy.

On Monday, the government cut its fiscal 2019 real GDP growth forecast to 0.9 percent from 1.3 percent. In Wednesday’s report, inflation was not forecast to reach 2 percent until 2024, a further setback for the government and the central bank’s aim of meeting the inflation target.

Based on the government’s more conservative :baseline scenario” in which real GDP growth is estimated to hover around 1 percent in the coming years, the primary budget was seen as being in the red through the forecast period to 2028.

A primary budget surplus was originally targeted for 2020, but it has repeatedly been pushed back due to a bulging cost of welfare to support the aging population and fiscal stimulus to pull Japan out of two decades of deflation and stagnation.

The government has now pledged to balance a primary budget by the fiscal year end to March 2026.

This fiscal year’s budget spending reached a record 101.5 trillion yen ($935.05 billion) including 2 trillion yen in steps to ease a pain from a planned sales tax.

Next fiscal year’s budget is also expected to exceed 100 trillion yen for a second straight year, highlighting the difficulty in curbing fiscal spending. It features 4.4 trillion yen in spending for measures to promote Abe’s growth strategy.


Where’s the beef? Argentine cattle ranchers hope it’s heading to China

Updated 18 September 2019

Where’s the beef? Argentine cattle ranchers hope it’s heading to China

  • Surging sales to Beijing shake up global meat trade and deliver tasty windfall for Latin American giant

BUENOS AIRES: Cattle ranchers in Argentina, which recently edged out neighbor Brazil as the top exporter of beef to China, are hoping to build on that status by getting more local meatpacking plants approved by Beijing, industry officials and other sources told Reuters.

An Argentine industry group is currently in China looking to promote the South American country’s famed T-bone steaks and sirloins, while Chinese teams have recently inspected Argentine local meat plants, the sources said.

The push, after a massive spike in Argentine beef exports to the world’s No. 2 economy this year, underscores how China is looking to diversify its protein supply, shaking up the global meat trade as African swine fever hammers its domestic hog herd.

It is also an important windfall for Latin America’s third-biggest economy, which is battling to get out of a deep recession and facing a swirling debt crisis ahead of elections in October that will likely usher in a new government.

Argentina, which traditionally exports cheaper cuts to China, saw its beef sales to the country more than double to $870 million in the first seven months of the year, data from its official INDEC statistics agency shows.

Chinese customs data show that amounted to around 185,604 tons of Argentine beef, giving it the top share of the Chinese import market with 21.7 percent, slightly ahead of Brazil’s 21.03 percent. That volume was a jump of 129 percent against the year before.

Santiago del Solar, chief of staff to Argentina’s agriculture minister, told Reuters there were many slaughterhouses up for approval and that China was working closely with Argentine food safety body Senasa.

“We will have news in the coming months about more pork, poultry and beef slaughterhouses being approved for China,” he said, adding Senasa was doing some inspections on behalf of China using an “honor system.”

Argentina’s ranchers are now looking for more. A trade delegation is currently in China meeting with potential buyers of the country’s meat, an industry official with knowledge of the meetings said.

The person added that a Chinese team had also recently traveled to Argentina to visit local meat plants.

“The Chinese were there last week in Buenos Aires, they were doing inspections and made good progress. The plants issue is pretty good, but with China they make approvals when they want to do it,” he said.

“We are optimistic with the results. It seems they didn’t find anomalies, but yes, it depends on the time frame of the Chinese.”

The progress comes after China granted export licenses to 25 Brazilian meatpacking plants earlier this month. Brazil has also seen a surge in meat demand from China.

China’s General Administration of Customs, which approves new imports, also recently gave the green light to imports of soymeal from Argentina, following decades of talks between the two countries.

The customs body did not immediately respond to a faxed request for comment from Reuters asking about new Chinese approvals for Argentine meat plants.

A second person, a manager at a state-owned Chinese trading house, said he had met with an Argentine firm last week during the delegation’s visit. He declined to name the firm, which had met with China customs officials, but said it had already been approved for exports and was seeking further plant approvals.

Miguel Schiariti, president of the CICCRA meat industry chamber, said a Chinese team had also recently done a video-conference inspection of an Argentine plant alongside Senasa, with the aim of approving the facility for export.

“There are 11 meat plants ready to be approved and (the Chinese) are doing it one by one. But approval is taking a long time,” he said.

“These places would meet the criteria for approval, but the Chinese have always been very cautious, despite the problems they have with pork. It seems to me that plants won’t get approved before November.”