The latest report from the government's Tax Commission has a sobering message: In the long run, taxes in Japan have nowhere to go but up. As the commission's chairman, Mr. Hiromitsu Ishi, points out, there is no way to avoid tax increases in order to put the nation's fiscal house in order.
For a start, the commission is calling for the phased abolition of the flat-rate income tax cut for individuals, beginning in fiscal 2005. Further down the road, perhaps beginning in fiscal 2007 at the earliest, a higher consumption tax (which is now 5 percent) is considered unavoidable.
The central problem is an enormous budget deficit resulting from chronic shortfalls in tax revenues. To close the budget gap, the government issues tens of trillions of yen of IOUs every year. The debt load -- the balance of government bonds -- is likely to exceed 600 trillion yen at the end of fiscal 2004. The national debt -- the sum of central and local government debts -- amounts to about 160 percent of the gross domestic product.