Prime Minister Shinzo Abe is poised to raise Japan's sales tax, but this bruising political decision leaves unresolved the bigger and much more complicated task of curbing runaway social-welfare spending.
The tax hike, Japan's first serious move in nearly two decades to rein in the worst debt burden in the developed world, looks like the easy part.
Attention has focused on the sales tax increase - still not formally decided - which is hugely politically sensitive in Japan after the last rise, in 1997, was widely blamed for tipping the economy into recession.
But any improvement in government revenue from the tax increase will be dwarfed by expenditures, where a rapidly ageing society and generous public services are blowing an ever-bigger hole in the budget.
"There is no real progress on containing welfare spending, so even if you raise the sales tax, the country's finances won't improve," said Norio Miyagawa, senior economist at Mizuho Securities Research & Consulting.
"We know what needs to be done. But the government is pushing back important decisions."
With the most rapidly aging society in the world - a quarter of the population is already over 65 - welfare is the biggest and fastest-growing category of spending. The shrinking workforce is crimping payments into the welfare system while the boom in the number of retirees swells government payouts.
The government has taken some steps, such as raising the retirement age - decided before Abe took office in December. But there is scant progress to show on such contentious issues as cutting benefits to the wealthy, adjusting pension payouts to prices or getting local governments to bear more of the burden.
Source: Reuters
