By Takaya Yamaguchi
Japan's tax revenue undershot government estimates for the first time in two years in the fiscal year to last March as the coronavirus crisis dealt a heavy blow to corporate profits, several government sources said on Wednesday.
It was the first time in two years that the nation's tax revenue has fallen below 60 trillion yen ($558.14 billion), the sources said on condition of anonymity because they are not authorised to speak to media.
The government has revised down the fiscal 2019/20 tax revenue to 58.4 trillion yen, from 60.2 trillion yen that had been estimated in December. In the prior year, tax revenue hit 60.4 trillion yen, a record that exceeded the previous high registered in the 1990/91 towards the end of the bubble era.
The decline in tax revenue marked a setback for Prime Minister Shinzo Abe's stimulus policy dubbed "Abenomics" which boosted tax revenue over years on the back of the aggressive monetary and fiscal stimulus.
But the health crisis has changed all that, underscoring a challenge for Abe to achieve both economic growth and fiscal reform, with industrial world's heaviest public debt burden at twice the size of its $5 trillion economy.
"Tax revenue will slide further this fiscal year to around 50 trillion yen -- closer to a level seen at the start of Abenomics," said Koya Miyamae, senior economist at SMBC Nikko Securities. "That would cause deficit-covering bonds to rise."
Of the three major sources of tax revenue, corporate tax undershot earlier estimates by 0.9 trillion yen to 10.8 trillion yen due to falling profits, the sources said. Income and sales tax receipts remained largely unchanged at 19.2 trillion yen and 18.4 trillion yen, respectively.
Falling tax revenue and snowballing social security spending to support the population have already made it hard to achieve a primary budget surplus by the end of the March 2026 fiscal year.