Finance Minister Koji Omi said Tuesday it will be difficult to balance the budget by 2011, but the government will continue to reduce spending.
"We won't loosen our grip on fiscal reform" and will push for spending cuts in a budget proposal for the year starting in April 2008, Omi said. The Finance Ministry will release an outline of next year's budget this week.
The Cabinet Office said Monday it no longer expects revenue to exceed spending in the year starting April 2011, although it still predicts the deficit to be wiped out. The primary balance — the difference between tax revenue and spending — will achieve only equilibrium and not the 0.2 percent surplus predicted in January, it said.
Omi said even the revised estimate will be hard to achieve because it omits extra spending to encourage child care as well as a likely rise in debt-servicing costs.
Long-term interest rates will "probably surge in several years," and the estimate doesn't reflect that, he said. "The actual primary-balance figure will be more severe than the number" released Monday.
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