Japan Tax Revenues Hit Record 84 T. Yen in FY 2025

Tokyo, July 3 (Jiji Press)–The Japanese government’s tax revenues in fiscal 2025 rose 12.0 pct from the previous year to 84,222.6 billion yen, hitting a record high for the sixth consecutive year, the Finance Ministry said Friday. General-account tax revenues in the fiscal year that ended in March exceeded the fiscal 2024 level of 75,232.1 billion yen by about 9 trillion yen, logging the largest increase on record. The growth reflected higher wages and corporate earnings, as well as a rise in the value of consumption amid inflation. In fiscal 2025, revenue from all three major taxes–the income, consumption and corporate taxes–posted year-on-year growth. Income tax revenue climbed 19.1 pct to 25,256.5 billion yen, thanks to the end of the fixed-amount income tax cut conducted in fiscal 2024, as well as higher employment income due to wage hikes. Tax revenue from financial income also increased, supported by rising interest rates and stock prices. Consumption tax revenue rose 4.0 pct to a record 26,027.8 billion yen. Corporate tax revenue also hit a record high, at 21,745 billion yen, up 21.4 pct, due to strong earnings at financial institutions on the back of rising interest rates and robust business results at other companies partly reflecting growing demand related to artificial intelligence. Meanwhile, fiscal 2025 nontax revenue exceeded the combined amount planned under the government’s initial and supplementary budgets by 988 billion yen, because of larger-than-expected contributions from the Bank of Japan to the state coffers. Funds left unused under the fiscal 2025 budgets are expected to total 2,099.3 billion yen. Thanks to the larger-than-expected nontax revenue and unused funds, the government was able to reduce its bond issuance by 3 trillion yen from the initial plan. Surplus funds, or revenues minus expenditures, amounted to 2,608.8 billion yen, the third largest on record. More than half of the surplus will be used to redeem government bonds in accordance with the public finance law, while the remainder is expected to be used for measures to strengthen Japan’s defense capabilities. The administration of Prime Minister Sanae Takaichi, which advocates a “responsible and proactive” fiscal policy, aims to secure financial resources necessary to promote economic growth while maintaining financial market confidence. In compiling its fiscal 2027 budget, the government is expected to face challenges in securing resources to make up for a revenue shortfall from a planned consumption tax cut and cover higher defense spending and growth in bond interest payments. In addition to a review of expenditures, such as subsidies, the government will consider the possibility of utilizing nontax revenue and funds left unused. However, these funds cannot be considered stable financial resources, possibly leading financial markets to question the government’s commitment to fiscal discipline, pundits said. END [Copyright The Jiji Press, Ltd.]