Japan budget surplus forecast delayed as fiscal reforms struggle

Japan has pushed back its budget surplus forecast twelve months. (Reuters)
Updated 31 July 2019

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.


Huawei's third-quarter revenue jumps 27% as smartphone sales surge

Updated 16 October 2019

Huawei's third-quarter revenue jumps 27% as smartphone sales surge

  • American companies, significantly disrupting its ability to source key parts
  • Huawei was all but banned by the United States in May from doing business with American companies

SHENZHEN, SHANGHAI: Huawei Technologies Co. Ltd’s third-quarter revenue jumped 27%, driven by a surge in shipments of smartphones launched before a trade blacklisting by the United States expected to hammer its business.
Huawei, the world’s biggest maker of telecom network equipment and the No. 2 manufacturer of smartphones, was all but banned by the United States in May from doing business with American companies, significantly disrupting its ability to source key parts.
The company has been granted a reprieve until November, meaning it will lose access to some technology next month. Huawei has so far mainly sold smartphones that were launched before the ban.
Its newest Mate 30 smartphone — which lacks access to a licensed version of Google’s Android operating system — started sales last month.
Huawei in August said the curbs would hurt less than initially feared, but could still push its smartphone unit’s revenue lower by about $10 billion this year.
The tech giant did not break down third-quarter figures but said on Wednesday revenue for the first three quarters of the year grew 24.4% to 610.8 billion yuan.
Revenue in the quarter ended Sept. 30 rose to 165.29 billion yuan ($23.28 billion) according to Reuters calculations based on previous statements from Huawei.
“Huawei’s overseas shipments bounced back quickly in the third quarter although they are yet to return to pre-US ban levels,” said Nicole Peng, vice president for mobility at consultancy Canalys.
“The Q3 result is truly impressive given the tremendous pressure the company is facing. But it is worth noting that strong shipments were driven by devices launched pre-US ban, and the long-term outlook is still dim,” she added.
The company said it has shipped 185 million smartphones so far this year. Based on the company’s previous statements and estimates from market research firm Strategy Analytics, that indicates a 29% surge in third-quarter smartphone shipments.
Still, growth in the third quarter slowed from the 39% increase the company reported in the first quarter. Huawei did not break out figures for the second quarter either, but has said revenue rose 23.2% in the first half of the year.
“Our continued strong performance in Q3 shows our customers’ trust in Huawei, our technology and services, despite the actions and unfounded allegations against us by some national governments,” Huawei spokesman Joe Kelly told Reuters.
The US government alleges Huawei is a national security risk as its equipment could be used by Beijing to spy. Huawei has repeatedly denied its products pose a security threat.
The company, which is now trying to reduce its reliance on foreign technology, said last month that it has started making 5G base stations without US components.
It is also developing its own mobile operating system as the curbs cut its access to Google’s Android operating system, though analysts are skeptical that Huawei’s Harmony system is yet a viable alternative.
Still, promotions and patriotic purchases have driven Huawei’s smartphone sales in China — surging by a nearly a third compared to a record high in the June quarter — helping it more than offset a shipments slump in the global market.