Array

TOKYO, June 11 (Reuters) Japan may need to hike its consumption tax to 6 to 8 percent from the current 5 percent in order to achieve a key fiscal target, the Nihon Keizai Shimbun (Nikkei) said on Sunday.

Japan's government has vowed to move the primary balance -- revenues and spending excluding debt issuance and servicing -- into surplus early in the next decade, but raising taxes, particularly the consumption tax, is politically sensitive.

According to the Nikkei, a draft of the government's fiscal reform strategy report showed Japan would need to raise its consumption tax to 6 to 8 percent in order to bring the primary balance into surplus in fiscal 2011.

That calculation is based on the government's estimate that there would be a roughly 15.5 trillion yen ($136 billion) gap that would have to be filled to bring the primary balance into surplus.

If the gap was narrowed by a 8-13 trillion yen cut in spending, the sales tax would need to be raised by 1 to 3 percentage points from the current 5 percent, the Nikkei added.

Officials were not immediately available for comment.

Japan's outstanding public debt is expected to rise to 775 trillion yen at the end of fiscal 2006/07, roughly 151 percent of the nation's gross domestic product.

The government and ruling coalition are now working to compile a report on Japan's medium-term strategy to reform both budgetary spending and revenues by around the end of June.

($1=113.88 Yen) REUTERS PV KP1817