Government fiscal plan proposes social welfare cut and consumption tax rate increase

The government on June 3 updated its basic policy on economic and fiscal management that will be guidelines for drafting the budget for fiscal year 2005 (from April 2005 to March 2006) and pursuing the Koizumi Cabinet's "reform".

The updated "basic policy" stated that the government will comprehensively review the budget for social security programs that is expected to increase due to the aging of the population. In order to hold down the increase, it said that benefits of programs including nursing care, welfare, and medical care will be reviewed.

The government made clear in the policy that it will decide how to reform the tax system in two years based on the FY 2004 ruling parties' basic plan of tax system revision that proposed an increase of the consumption tax rate in FY 2007.

The policy stated that the government will transfer 3 trillion yen in tax revenue sources from the national government to local governments. The plan to cut state subsidies for local government is also stated in the policy. (end)