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Japan Posts Smallest Primary Balance Deficit Since 2001, Eyes FY2026 Surplus

The forecast warns that a large supplementary budget this autumn could shift spending into FY2026, risking a return to deficit.

Overview

  • Cabinet Office cuts the FY2025 primary balance deficit estimate to ¥3.2 trillion, marking the smallest shortfall since 2001.
  • The agency upgrades its FY2026 outlook to a ¥3.6 trillion surplus, up from a ¥2.2 trillion forecast in January.
  • Real GDP growth projections are lowered to 0.7% for FY2025 and set at 0.9% for FY2026, reflecting inflation and US tariff pressures.
  • Forecast revisions account for reduced exports and corporate equipment investment due to recent US tariff measures.
  • Officials caution that a large supplementary budget this autumn could delay spending into FY2026 and reverse the surplus into deficit.