TOKYO -- The government is set to issue additional deficit-covering bonds as it has decided to revise downward its tax revenue estimate for the current fiscal year, those linked to the government said.
The government now forecasts that tax revenue will be around 1 to 2 trillion yen lower than the 62.495 trillion yen estimated in the initial state budget for fiscal 2019 due to a decline in corporate performance.
Additional debt-covering bonds will be issued as part of a fiscal 2019 supplementary budget, which the government will compile in December, to make up for the tax revenue shortfall.
It will be the first time in three years for Japan to cut its tax revenue forecast in the middle of a fiscal year and issue deficit-covering bonds.
Initially, the government had projected that Japan's tax revenue would hit a record high when it compiled the initial fiscal 2019 state budget because of a consumption tax increase from 8% to 10% in October 2019 and an expected increase in corporate tax revenue.
However, many companies, mainly manufacturers, have revised their profits downward following a slump in exports due to the U.S.-China trade war and other factors. As a result, Japan's corporate tax revenue in the first half of this fiscal year came to 825.5 billion yen, about 10% lower than a year earlier. As the government will be required to refund a massive amount of taxes in the latter half of the fiscal year, it has decided to lower its tax revenue estimate.
Government sources predict that Japan's tax revenue could fall below the fiscal 2018 level, which stood at 60.4 trillion yen.
Deficit-financing bonds are issued to make up for a state revenue shortfall. In the initial state budget for fiscal 2019, the government had intended to issue approximately 32.66 trillion yen worth of bonds, some 25.7 trillion yen of which would be debt-covering bonds. However, it will be forced to issue more than this in the supplementary budget to make up for the shortage in tax revenue.
The government of Prime Minister Shinzo Abe, which has strived to achieve both economic growth and fiscal rehabilitation, had taken advantage of an increase in tax revenue stemming from an economic recovery to decrease the issuance of deficit-covering bonds over the past few years.
However, changes in the economic environment are beginning to cast a shadow over Japan's state finances.
The government's downward revision of its fiscal 2019 tax revenue estimate could have a serious impact on its compilation of the fiscal 2020 state budget.
(Japanese original by Arimasa Mori, Business News Department)