Japan's government and ruling coalition parties agreed on Monday to seek up to 14.3 trillion yen ($123 billion) in spending cuts over the next five years in an effort to balance the budget, party officials said.
Faced with a massive public debt, Japan's government has vowed to move its primary balance - revenues and spending excluding debt issuance and servicing costs - into surplus by fiscal 2011/12. On current estimates of revenues and spending, the government is likely to miss that goal by about 16.5 trillion yen.
Policy-makers are examining ways to fill the gap, which would likely involve raising the politically sensitive consumption tax, now at 5 percent.
"It's important to set a clear goal and to move firmly toward achieving it," Chief Cabinet Secretary Shinzo Abe told a news conference. Members of the ruling coalition parties - the dominant Liberal Democratic Party (LDP) and the smaller New Komeito party - have often opposed budget-cutting steps taken by Prime Minister Junichiro Koizumi's government.
But Koizumi chased out many lawmakers opposed to his policies in a successful election campaign last year, and on Monday the ruling parties decided to call for spending cuts of 11.4 to 14.3 trillion yen. "The government and the parties are on the same page now, and that's very significant," Abe said.
The figures will be a starting point as the government finalises its report on Japan's medium-term strategy on fiscal and other reforms, expected in early July.
The plan, however, is not likely to include details on how much the consumption tax should be raised in coming years, although some officials have called for a three percentage point increase while others, such as Finance Minister Sadakazu Tanigaki, have said that may not be enough. Japan's outstanding public debt - including that held by central and local governments - as well as borrowings is expected to total about 774 trillion yen ($6.65 trillion) at the end of next March.