Japan finances to worsen

Japan's government will face greater difficulty paying its way without debt a decade from now than previously thought according to a new projection to be handed to ministers Friday, a news report said.

The "primary balance deficit" - a measure of how well the government can pay its way with taxes and other revenues - is set to hit 23.2 trillion yen (280 billion dollars) in the 2020 fiscal year, up 1.5 trillion yen from an earlier estimate in June, the Nikkei business daily said.

The official forecast, to be submitted to the cabinet on Friday, shows that Prime Minister Naoto Kan faces an even greater challenge meeting his government's target of a primary balance surplus by the end of fiscal 2020.

The new estimate, calculated under a conservative methodology, means Tokyo will fall 23.2 trillion yen short of that goal, the Nikkei said.

"This suggests that drastic steps, including a consumption tax hike to nine percent-plus or massive spending cuts, may have to be carried out down the road," the Nikkei said.

The primary budget balance indicates the gap between revenues excluding borrowings and spending excluding interest payments on debt.

Japan has long been mired in the industrialised world's biggest public debt at nearly 200 percent of GDP.

Since coming to power in June, Kan has joined a chorus of economists and lawmakers and repeatedly discussed the need for the five-percent consumption tax to be raised, possibly to 10 percent.

AFP