The Liberal Democratic Party's Research Commission on the Tax System has started discussions on fiscal 2009 tax policies at a time when the central and local governments have outstanding debts totaling about ¥800 trillion, or about 1.5 times the nation's gross domestic product — the worst figure among the developed nations.
Tax revenues can finance only about 60 percent of the national budget. The LDP panel must tackle the difficult task of finding ways to close the gap. Beginning with the Koizumi administration in 2001, the government has pursued the policy of realizing a small but efficient government under limited financial resources. But social welfare, which includes medical and nursing care services and pensions, should not be an area where either the central government or local governments shrink from fulfilling their responsibilities.
To create funds for social welfare, some LDP lawmakers pin their hopes on economizing through administrative and financial reforms as well as a natural increase in tax revenues from economic growth. But it appears unlikely that this approach will create enough funds to pay for the social welfare costs that are rising under the pressure of the progressively graying population.