Kaori Kaneko, Daniel Leussink

YOKOHAMA/TOKYO – Japan must have a more credible target date than fiscal 2020 to achieve a balanced primary budget. This was stated Wednesday by an official from Moody’s Investors Service (NYSE:).

Christian de Guzman was a senior vice-president in the agency’s sovereign risk group.

Japan kept its fiscal 2025 goal of reaching a primary balance in FY2025 despite massive spending on social and economic relief from the coronavirus epidemic over the past two year.

De Guzman, an online interviewer from Singapore said that in order to attain some semblance material fiscal consolidation or balance sheet repair there must be a stronger target and the appropriate actions underlying it.

Japan went into the crisis with debts more than twice the amount of its $4.6 billion economy. The fiscal strain it created during the crisis might have had a greater impact on Japan’s finances than other countries.

De Guzman, when asked about Japan’s ability to push back its target (which serves as an indicator for diagnosing fiscal health in a country), said that Moody’s did not have a specific recommendation.

De Guzman said that Moody’s had already stated in 2019 that Japan’s fiscal 2020 target was unattainable, prior to the current health crisis. The pandemic made it even more unrealistic.

De Guzman indicated that “it is not feasible at this time, considering current policy settings,” especially given ongoing economic accommodation.

He suggested that new government measures may be needed to stimulate growth and boost revenues.

We can’t depend on spending consolidation alone to reach that primary balance goal.

Japan is carrying a heavy debt burden, but Tokyo has the ability to finance its debt. A lot of this funding, directly or indirectly, comes from strong balance sheets within the private sector, said he.

Moody’s Japan rating is A1, four notches lower than its highest rating. The outlook is positive for Japan.