The Japanese government will soon show it is making progress in efforts to return to a balanced budget, despite record debt issuance planned in the next fiscal year, Economics Minister Heizo Takenaka said on Sunday.
The government is on course to meet a pledge to return the primary balance - basic revenues and spending excluding bond issuance and debt servicing costs - to neutral by early 2010, he said.
The primary balance, which has fallen deeper into the red during the last decade to around 5.4 percent of gross domestic product (GDP), will clearly improve in fiscal 2004/05 starting in April, Takenaka said on a television talk show.
"It will be clear that the primary balance deficit will narrow in the next fiscal year. I can promise you that. The figures will come out in mid-January," he said.
But the overall budget deficit will widen marginally in 2004/05.
The government last month compiled a draft budget totalling 82.11 trillion yen for 2004/05, up 0.4 percent from the current fiscal year.
The draft includes the issue of a record 36.59 trillion yen in government bonds, up from 36.45 trillion a year earlier.
But it also projected growth of 1.8 percent for the world's second-biggest economy in the new fiscal year.
"The ratio (of primary deficit relative to GDP) is currently around five percent. If we do simple math, this means we want a cut of 0.5 percentage point every year," Takenaka said.
He said the reduction in 2004/05 should be bigger than 0.5 point but that this did not necessarily mean the balanced budget target would be met earlier than planned.
"It's easier to achieve bigger cuts when the economy is strong, but it's more difficult when the economy is not as strong," he said. "It's a good opportunity to make bigger cuts, given the economy is relatively strong right now."
Takenaka declined to comment in detail on whether the government's balanced budget plan took into account a possible rise in the nation's five-percent consumption tax - a politically touchy issue which Prime Minister Junichiro Koizumi has said would not happen during his tenure due to end in 2006.
"Until 2006, we will tackle the deficit by restraining spending. After that, the deficit should go down at a similar pace, but it is up to the administration at the time whether to achieve that through spending cuts or a revenue increase."