Japan's primary budget balance is expected to remain in the red in the fiscal year 2025/26 when policymakers had hoped to achieve a surplus, the Cabinet Office estimates showed, highlighting the stiff costs of servicing a record public debt. The primary balance - a key measure of how much Japan's national and local governments finance policy measures without relying on debt - was estimated at a deficit of 1.1 trillion yen ($7.44 billion), versus the previous forecast of 1.3 trillion yen shortfall seen in July. Saddled with the industrial world's worst public debt at more than double the size of its economy, Japan has been focussed on improving its primary budget but debt servicing costs and COVID-related expenses have hampered its efforts.
Official data on household net financial savings indicates that it fell to 5.1% of GDP in FY23 from 11.5% in 2020-21, well below its long-run annual average of 7.0-7.5%. The fall was driven by a rapid rise in financial liabilities (household borrowings - from 3.8% of GDP in FY22 to 5.8% in FY23.