The economy has the potential to achieve 2 percent annual growth, and drastic structural reforms could put it on a full-scale recovery path, according to an interim policy package announced Wednesday by the Economic Strategy Council.
The package -- drawn up by the advisory panel to Prime Minister Keizo Obuchi -- calls for a consumption tax hike to help finance mounting welfare costs in the rapidly aging society.
Intended to give the government direction to resuscitate the economy, the package, however, lacks concreteness and falls short of spelling out the timing and other details of proposed structural reforms.
The package fails to specify a desirable rate for a hiked consumption tax, apparently avoiding politically sensitive figures in the proposal.
According to officials of the council, no consensus has been reached on specifics, including a new consumption tax rate or reform timetable.
The council, made up of scholars and business leaders, will further discuss the issues spelled out in the interim report and wrap up debate for a final report to be announced next month.
According to the most likely scenario for recovery as envisioned by the council, the economy will be on a recovery path around 2001 after drastic structural reforms are carried out.
Up until then, the unemployment rate will probably soar, it added.