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Budgets are a way of planning the future of a company and of course this can be the same for individuals and countries.  On 1st October 2013 the FT wrote an article explain how  Japan is suffering from a budget gap.  A budget gap simply means the in-flow of cash is not covering the expected out-flow of cash.  In the case of Japan, tax revenues have not kept up with the out-flows of cash needed within that country. The statistics from the Japanese ministry of finance show that the expenditure in 2013 is in excess of 90 trillion yen whereas the income is only expected to be in excess of 40 trillion yen. An aging population is putting strain on the budget with social security cost increasing significantly.

The simply answer to a country budget is to increase the incoming cash – the tax revenues,   of course it is never as easy as that you have to consider the consequences of everything you do when planning a budget.  Can the country afford tax increases when, for example, Japan is still recovering from the Asian financial crisis? If a company, individual or country can’t increase their income can they decrease their costs but once again the consequences have to be considered. Budgets are incredibly useful tools if used correctly but it is not easy when making decisions to fix a budget gap.

 

Original article: Allen, K. Mind the Gap: Japan’s big budget hole.  Financial Times 1st October 2013.

 

 

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