A soon-to-be-released government white paper says raising the 5 percent consumption tax to 8 percent and cutting social security benefits for each generation by 20 percent beginning in 2005 should be considered as ways to alleviate the financial burden on future generations, according to the final draft.

The fiscal 2001 Cabinet Office white paper on economy and finance expects GDP to annually grow around 1 percent in two or three years' time and a potential growth rate of between 2 percent and 3 percent in the mid- to long term if economic structural reforms promoted by Prime Minister Junichiro Koizumi are carried out, says the draft, which was obtained Saturday.

But it expresses concerns that the current sluggishness of Japan's economy may linger and that a recovery may not occur in or before the second half of 2002 if the U.S. downturn continues due to the effects of the Sept. 11 terrorist attacks.

One possible scenario for Japan's economic recovery envisages the economy starting to show signs of improvement around late 2002 due to an increase in exports, but the potential for recovery is currently weak, it says.

The potential growth rate is based on a situation in which Japan's capital and labor force are utilized at the maximum rates. The report is scheduled to be submitted to the Cabinet on Dec. 4.

The draft also says that even mild deflation would negatively affect the economy because it would increase the burden of debt-ridden companies.

The draft also urges the Bank of Japan to expand quantitative monetary easing, such as by buying more bonds, and introducing a policy of targeting inflation.

The BOJ has avoided adopting such measures, but the draft says they would not have major side effects.