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The government on Monday revised downward the estimated shortfall it must cover if it is to reach its goal of achieving a budget surplus by fiscal 2011 from 20 trillion yen to 17 trillion yen.

The government had intended to make an even larger downward revision in the deficit, putting the figure at 15.5 trillion yen in light of expected tax revenue growth and lower social security spending, government officials said.

But at a working-level meeting on fiscal matters, economic and fiscal policy minister Kaoru Yosano presented a projection that excluded cuts in social security and personnel expenditures.

Yosano made the last-minute adjustment because of the difficulty in determining whether and how long the planned reform of the health-care system will take, the officials said.

The government target calls for a primary surplus, which excludes debt-servicing costs and new bond issues, by fiscal 2011.

Yosano said the 17 trillion yen figure should be a starting point for further discussion, hinting it might be reduced further.

Delegates from the ruling coalition of the Liberal Democratic Party and New Komeito did not object to Yosano’s numbers, the officials said.

Both the government and ruling parties hope to cover more than half the estimated deficit through spending cuts.

An LDP team is working on specific proposals for cost cuts to be included in the annual basic economic and fiscal policy, scheduled for release in July.

The government’s earlier, higher deficit estimate excluded funds from additional bond issues over the period to fiscal 2011.

The deficit projections have been reduced because it now appears certain that fiscal 2006 tax revenue will exceed earlier projections thanks to the economic recovery.

The governing parties hope the lower deficit estimates will make talk of further tax increases unnecessary and improve their chances in the Upper House election next summer.

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