Japan plots delay to balancing budget without spooking markets, G20 partners

Any fiscal slippage would mean Japan keeping its money printing presses running longer, and would break a commitment to G20 countries.

That could risk provoking fresh accusations of currency manipulation from the United States and other G20 countries if they saw Japan’s move as a further attempt to keep the yen weak.

Abe also has to be careful of the potential market reaction. Any reduction in the commitment to whittling down a public debt, that at twice the size of the economy is the worst among major economies, could risk damaging investor confidence in Japan.

While Abe is unlikely to have decided yet on whether to proceed with a scheduled sales tax hike in 2019, there are plenty of reasons to postpone it, the government sources say.

Abe’s aides say the premier, who twice delayed a hike to 10 percent after an increase to 8 percent in 2014 pushed Japan to the verge of recession, won’t risk cooling the economy again.

“I think the prime minister understands that putting off the sales tax hike is in the best interest of fiscal consolidation,” said Satoshi Fujii, a special adviser to Abe.


Having seen his support slump from a series of scandals, Abe must decide whether to move ahead with the tax hike by mid-next year – around the time he could call a general election that must be held by late 2018.

But, even the International Monetary Fund said last week that sustaining economic growth should take priority over consolidating the budget for now.

Japanese premier Shinzo Abe is looking to quietly ditch a pledge to balance the budget by fiscal 2020 in favor of a looser debt-to-GDP ratio target, a move that gives him a free hand to delay again an unpopular sales tax hike, government sources say. (Reuters)

Foreign direct investment to Japan for fiscal 2016 topped 3 trillion yen ($26.9 billion) for the first time ever, thanks mainly to an increasing number of takeovers of domestic businesses by overseas investment funds. Japanese operations of foreign establishments have also become keen to reinvest what they earn into Japan. (Nikkei)

A private research institute estimates that about 30 percent of Japanese houses will be vacant in 16 years unless they are reoccupied or demolished. (NHK)

The European Union and Japan are close to sealing one of the largest trade agreements ever, a deal that could further isolate the United States as President Trump forges a protectionist path. (nytimes.com)

The Japanese government on Thursday upgraded its assessment of the economy in its monthly report for the first time since December. (marketwatch.com)

China’s bond market will double in size from the current $9 trillion over the next five years, overtaking Japan’s to become the world’s second largest behind the United States’, UBS Asset Management said in a report.

As the Nikkei 225 Stock Average rises toward its highest level in more than two decades, one group of investors has surprisingly missed out. (Bloomberg)

Japan logged a customs-cleared trade deficit of 203.4 billion yen in May, against the year-before deficit of 47.3 billion yen, the Ministry of Finance said Monday. (Jiji)

Officials at the Bank of Japan have wrapped up a 2-day policy meeting. They have decided to press on with their easing program as they pursue their 2-percent inflation target. (NHK)

Japanese farmers have urged lawmakers to stop officials from making too many concessions in an Economic Partnership Agreement with the European Union. (NHK)

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