It is no longer possible for the government to “excessively” depend on debt to manage the country’s finances, Finance Minister Yoshihiko Noda warned Monday.
Noda also called on the Diet to swiftly pass the draft budget for next fiscal year to give the public a sense of security.
Economic and fiscal policy minister Kaoru Yosano meanwhile said the government will compile a plan in June for social security and tax reforms, indicating the 5 percent consumption tax may be raised to improve its deteriorating public finances.
“It is essential to pass the fiscal 2011 budget within the current year (ending March) to immediately implement the policies directly linked to the people’s lives,” Noda said in his speech as the Diet began its first session of the year.
“I hope you will deliberate and swiftly approve (the budget) along with related laws,” he said, asking for cooperation from the opposition camp.
Earlier in the day, Prime Minister Naoto Kan’s Cabinet endorsed the initial budget plan for fiscal 2011 worth ¥92.41 trillion before submitting it to the Diet. The record amount covers expenditures, including for child care benefits, and swelling social security costs.
The economy faces the challenges of deflation and a falling birthrate, Noda said, adding a path must be cleared toward a solution for “a new economic society.”
Yosano in his speech stressed that tax reforms are necessary and that it effectively means raising the sales levy.
“We are going to present the total picture by June of social security reform as well as . . . comprehensive reform of the tax system, including the consumption tax, in order to secure necessary funds” to maintain welfare services, Yosano told Diet members.
People are starting to realize the welfare system cannot be sustained without reform, Yosano said, vowing to mend the system.
The gross debt of the central and regional governments is expected to reach 184 percent of gross domestic product in March 2012, the worst among the major developed economies. A Cabinet Office estimate shows the ratio could top 200 percent in fiscal 2016 at the earliest.
“To ensure sustainable development, we must strongly press for economic growth, fiscal restoration and social security reform,” Noda said.
The finance minister also called for nationwide debate on tax and social security reforms, underlining that those reforms must be based on a “national consensus” and the opposition parties must join in the talks.
The opposition camp has dominated the House of Councilors since the Upper House election last summer.
The government said Monday it will set up a task force possibly next month to promote a citizen-numbering system for taxes and social security administration it hopes to introduce in 2013 or later, its officials said.
Economic and fiscal policy minister Kaoru Yosano, as head of a study panel for the system, instructed its members to work on compiling bills for that end “in a resolute manner.”
Yosano also asked the members to brace for many challenges, saying, “The need for the numbering system has been discussed for a long time but it is the first time for the idea to be thrashed out to the level of making bills.”
The panel also will start holding symposiums nationwide in March or later to explain how the individual numbering system for collecting pension premiums and taxes would help people.
The government intends to come up with a basic policy on the numbering system by the end of January and nail down details about it in May through debates with experts before submitting bills to the Diet possibly next fall, the officials said.
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