Japan 2016/17 corporate tax revenue down in blow to Abenomics

A man reads a newspaper as a pedestrian walks past, inside a building at a business district in Tokyo

TOKYO (Reuters) – Japan’s corporate tax revenue fell to 10.3 trillion yen ($90 billion) for the last fiscal year, the lowest since fiscal 2012 when Prime Minister Shinzo Abe swept to power with a pledge to revive the moribund economy, the Ministry of Finance (MOF) said.

While corporate tax revenue was down 0.5 trillion yen from the previous year, the other key revenue components – sales tax and income tax – also fell, resulting in the first decline in overall tax receipt in seven years, it said.

Analysts say the declines in tax revenue meant that Abe’s strategy to boost tax income to fund fiscal stimulus under his “Abenomics” reflationary policy has been stymied.

Overall tax revenue came to about 55.5 trillion yen in the fiscal 2016 that ended in March, 0.8 trillion yen short of the previous year’s receipt and undershooting the prior year’s amount for the first time since 2009, the MOF said.

Despite the decline in tax revenue, Japan’s government bond issuance in the last fiscal year was 1 trillion yen less than the government had previously planned, as lower interest rates reduced debt-servicing costs.

Unused cash reserves like those set aside for emergency have also left the government with a surplus to deliver extra stimulus spending.

The fiscal 2016 year produced excess cash of 378.2 billion yen, the MOF said.

That was higher than the 252.4 billion yen figure of a year earlier, but far below annual amounts of over 1 trillion yen in the first years after the premier swept to power in late 2012.

Half of the excess cash must be spent to pay off debt under Japan’s budget rules. The remainder would be available for allocation to an extra stimulus budget that may be compiled later this year.

(Reporting by Tetsushi Kajimoto; Editing by Shri Navaratnam)