Japan's FY2020 primary balance goal likely to be achieved much more easily

Japan government's fiscal projection previously was based on tax revenue elasticity, i.e. the ratio of how much tax revenues rise or fall against a change in nominal economic growth, of around 1, which is said to correspond to average tax revenue elasticity over the long term. 

In the new fiscal projection, there seems to be no specific assumption of the tax revenue elasticity. This is probably because as the exit from deflationand economic revival is the main objective, there will be a substantial change expected in the relationship between nominal GDP and tax revenue.

It is estimated that with nominal GDP growth of around 3% and tax revenue elasticity of at least 1.5, achieving a primary balance surplus by FY2020 (the goal set by the government) should be relatively easy, even without any extra expenditure cuts. 

"Thus, the FY2020 primary balance goal is likely to be achieved much more easily than widely anticipated", says Societe Generale.