In the fiscal year ending March of this year, Japan's tax revenue once again reached a record high. This positive result was partly driven by weak yen and high inflation.
The Zhitong Finance App learned that in the fiscal year ending March of this year, Japan's tax revenue once again reached a record high. This positive result was partly driven by weak yen and high inflation.
Japan's Ministry of Finance reported on Wednesday that tax revenue for the previous fiscal year increased to 72.1 trillion yen (446 billion US dollars) from 71.1 trillion yen the previous year. Income tax revenue declined to 22.1 trillion yen from 22.5 trillion yen in fiscal 2022, while corporate tax revenue increased from 14.9 trillion yen to 15.9 trillion yen.
Even with the increase in revenue, Japan's fiscal difficulties remain serious. According to data from the International Monetary Fund (IMF), the country's public debt burden is the heaviest among developed countries, and is expected to reach 1105 trillion yen by the end of this fiscal year, equivalent to more than 250% of gross domestic product (GDP).
As the Bank of Japan is expected to raise interest rates again this year, the urgency of fiscal reform is increasing. The Japanese government last month reaffirmed its commitment to balance the budget for the fiscal year beginning in April 2026 in its most recent annual policy plan.
Record tax revenue partly reflects the impact of the weak yen on boosting the profits of Japanese exporter companies, including Toyota Motor Corporation (TM.US), which reported record operating profits. As the exchange rate of the yen against the US dollar recently reached a 38-year low, exporters are expected to continue to benefit, while rising import costs for raw materials, energy, and food will also present challenges for manufacturers and consumers.
Inflation has also contributed to improvements in the performance of some companies. According to a recent survey by Teikoku Databank, more companies that can pass on rising costs to customers through price increases are expected to increase profits compared to last year. Given that producer prices in Japan rose at their fastest rate in nine months in May, the pressure to raise prices is likely to continue.
The additional tax for this fiscal year was 851.7 billion yen, half of which was spent on defense spending. Amid escalating geopolitical tension in Asia, Prime Minister Fumio Kishida announced plans to double the military budget to 2% of GDP by fiscal year 2028 using funds from tax increases, spending reforms, and surpluses in 2022.
A better-than-expected tax could also trigger speculation about whether Fumio Kishida would consider implementing another tax refund. Following a record tax return last year, Fumio Kishida announced a tax refund of 40,000 yen, saying it was a way to return the increased tax to citizens. Government officials, including Finance Minister Shunichi Suzuki, have repeatedly insisted that such measures should be viewed as a one-off action.