The government should set a clear target to limit snowballing social welfare costs and keep budget deficits from swelling further, an advisory committee to Finance Minister Sadakazu Tanigaki said in a policy proposal Monday.
The Fiscal System Council said an increase in interest rates, a possibility due to the nascent economic recovery, could dampen growth and increase the financial burden on government coffers by boosting interest payments to bondholders.
Tanigaki will report the proposal Wednesday to the Council on Economic and Fiscal Policy, a key panel led by Prime Minister Junichiro Koizumi.
"The government needs to initiate reforms of the social welfare system by presenting to the public a clear target and timetable to limit the overall financial burden of pensions, medical service and elderly care," the proposal says.
It says the government should set a "numerical target for a medium term," as growing costs would raise serious public worries.
Toshiba Corp. Chairman Taizo Nishimuro, who heads a subcommittee of the Fiscal System Council, told a news conference after submitting the proposal that the government should stick to the target it announced last year.
The target is intended to limit the public's financial burden to around 50 percent of national income. Such a burden includes tax, social security services and the nation's budget deficits.