The cuts are intended to cover most of an estimated revenue shortfall of ¥16.5 trillion in fiscal 2011, by which time the government aims to achieve a primary balance surplus at the national and local levels.

The remaining shortage of ¥2.2 trillion to ¥5.1 trillion is to be covered by tax hikes, including a possible increase in the consumption tax from 5 percent. If the entire remaining shortage is financed by a consumption tax hike, the tax needs to be raised by 1 to 2 points.

The government proposed spending cuts worth ¥11.5 trillion to ¥14.5 trillion but there was opposition from Liberal-Democratic Party members from the Upper House.

The Japan Times Weekly: July 1, 2006
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