The government and the ruling bloc held their first meeting Monday aiming to overhaul the tax system and government spending in an effort to shore up public finances.
“The government has succeeded in trimming fiscal spending while achieving economic growth over the past several years. I want the panel to aim at further economic growth by reforming revenues and spending as a package,” said Prime Minister Junichiro Koizumi, who attended the meeting.
The outcome of the discussions will serve as an important reference point for the annual economic management and reform policy, scheduled to be adopted by the Cabinet next month.
It is also expected to provide an outline of economic policy for Koizumi’s successor after he leaves office in September.
For its inaugural meeting, the panel formed a 16-member working-level group that includes Chief Cabinet Secretary Shinzo Abe and LDP policy chief Hidenao Nakagawa.
The fiscal reform panel is made up of key Cabinet ministers in charge of economic policy, and representatives from the ruling Liberal Democratic Party and its coalition partner, New Komeito.
The panel hopes to narrow differences between the government and coalition lawmakers in order to promote economic growth, government officials said.
But panel members are believed to hold widely differing views on what changes to the budget-making process are required.
Finance Minister Sadakazu Tanigaki said reform of the social security system and grants to local governments, as well as ceding more tax-collecting authority to local governments, should be the priorities.
Internal Affairs and Communications Minister Heizo Takenaka stressed the need to reduce the burden on taxpayers.
Nakagawa said the panel should specify areas where the government can cut spending, adding that without such cuts the consumption tax will have to be raised.
Nakagawa and some Cabinet members had earlier agreed on an annual economic growth target of at least 2 percent. It is unclear whether the panel will endorse the target.