Japan: Japan Tax Revenue at 6-Year High
03 July 2014
Posted by: Author: Mitsuru Obe
Author: Mitsuru Obe (The Wall Street Journal)
Japan's tax revenue rose to its highest level in six years in the year ended March, as a weaker yen and higher share prices buoyed corporate earnings and capital gains, the Ministry of Finance said Thursday.
The ministry also said government spending in the last fiscal year was less than initially projected, as lower interest rates reduced the cost of interest payments on government debt. As a result, the government borrowed less than originally planned.
The figures are good news for the government of Prime Minister Shinzo Abe, which is struggling with massive deficits and towering debt. But they could reduce the urgency of government efforts to fix its financial state, just as discussions on the budget for the year starting April 2015 are set to begin in earnest later this month.
The ministry said tax revenue came to ¥47 trillion ($460 billion) in the year ended March, up from ¥44 trillion the previous year. It was the highest since the fiscal year beginning in 2007, when tax revenue totaled ¥51 trillion.
The government originally projected tax revenue of ¥43 trillion for the recently ended fiscal year, but the yen's sharp fall increased profits for exporters, while investors earned fatter capital gains from higher share prices, lifting taxable income.
Expenditures for the year came to ¥96.6 trillion against an original plan of ¥98 trillion, allowing the government to trim new borrowing by ¥2 trillion to ¥41 trillion.
All together, ¥1.4 trillion went unused during the year.
Still, government spending remains relatively high. Before the global recession that hit Japan around 2009, central government expenditures hovered around ¥80 trillion. Meanwhile, spending hasn't declined much from an all-time high of ¥101 trillion in the fiscal year beginning in 2009.
In the current fiscal year from March, the government plans to spend ¥96 trillion.
With government debt already exceeding a quadrillion yen, the ministry wants to rein in spending as much as possible in the next fiscal year.
But pressure to spend will likely grow with the economy expected to slow sharply due to the sales tax increase on April 1. Economists expect the economy to contract over 4% in the second quarter before recovering slowly in the third quarter.
The government plans another sales-tax increase in October 2015. Mr. Abe may choose to increase spending next year to cushion the effects of the next tax rise.
This article first appeared on online.wsj.com.