Japan’s Tax Revenues Exceed Forecast

by Mary Swire, Tax-News.com, Hong Kong

30 June 2010

The Japanese Finance Minister has announced that tax revenues for the fiscal year ended March, 2010 have exceeded the forecast by JPY1.9 trillion (USD21bn).

This is the first time since 2006 that revenues have exceeded the government’s forecast. Although tax receipts were higher than expected due to an increase in corporate tax revenues, the total tax revenues of JPY38.7 trillion were still below JPY40 trillion, a low not seen since 1986.

The forecast for last year’s tax revenues was originally set at JPY46.1 trillion, then adjusted to JPY36.9 trillion. The forecasts reflected the global economic decline and the consequent gloomy outlook for corporate tax revenues, but the higher revenue is seen as an indicator of Japan’s slow recovery from recession.

The higher than expected tax revenues will allow the Japanese government to cut debt issuance by JPY1.5 trillion. The government issued JPY500bn worth of government bonds last month but will now not issue any further bonds in the light of the revenue figures. Although the government aims to keep new bond issuance to current levels (JPY44.3 trillion) experts believe this may prove impossible given the level of Japan’s debts. Last fiscal year, Japan’s bond sales amounted to JPY52 trillion, much lower than forecast.

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