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The
primary budget deficit is expected to narrow partly because of
the sluggish inflation outlook, with lower prices helping
suppress government spending, said one of the sources, who spoke
on the condition of anonymity.
The forecast is also based on the assumption economic growth
would pick up, the source said.
Japan's government cut its forecasts for consumer prices earlier
this month, saying it expected them to rise 1.4 percent for
fiscal 2017, well below the 2 percent target the Bank of Japan
says will be met during the fiscal year ending in March 2018.
The primary budget, which excludes debt servicing costs and
income from bond sales, is a key measure of fiscal health. In
June, Prime Minister Shinzo Abe delayed a sales tax increase to
October 2019 from next April because of growing risks to the
economy - a step some economists worry would worsen Japan's
fiscal discipline.
(Reporting by Minami Funakoshi and Takashi Umekawa; Editing by
Richard Borsuk)
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