General expenditures need to be trimmed by 30 percent if the government is to bring Japan's finances under control by fiscal 2015 through spending cuts alone, according to a projection released Monday by the Fiscal System Council.
If the consumption tax is used solely to achieve primary budget balance, the rate needs to increase to 19 percent from the current 5 percent, the advisory panel to the finance minister said.
The primary budget balance is the fiscal condition by which expenditures, excluding debt-servicing costs, are fully covered by the year's tax revenues.
The projection signals an impending need for the government to both trim outlays and hike taxes to cope with inevitable increases in social security spending, given the nation's rapidly aging population.
At present, outlays in pension, medicine and nursing care account for 40 percent of general expenditures, a broad category of policy-related discretionary spending.
Social security-related spending by the government will jump to 43.5 trillion yen in fiscal 2015 from the current 27.5 trillion yen if the government maintains the same level of services, according to the forecast.
The amount will expand to 59.5 trillion yen in fiscal 2025, it says.
Revenues need to increase by about 40 percent to 83.1 trillion yen if the government wants a primary budget surplus -- when tax revenues exceed expenditures minus debt-servicing costs -- without reducing spending, it says.