Japan's national budget deficit could exceed 10 trillion yen($122.53 billion) in 2015, excluding the costs to rebuild the disaster-stricken northeast, the Nikkei daily reported citing government projections.
The consumption tax rate, which is currently 5 percent, will need to be raised by about 5 percentage points to make up the difference, the business paper said.
Economic and fiscal policy minister Kaoru Yosano will present the budget forecasts in June as part of a proposal to a government council on social security reform, the daily said.
Yosano is expected to explicitly call for raising the tax, the newspaper said.
Costs associated with reforming pensions, health care and other entitlements account for some 8 trillion yen of the projected budget shortfall, the Nikkei said.
The figures, based on current levels of spending on public works and other areas besides social security, show the impact of the changes under debate in the council, the Nikkei said.
On the revenue side, the projections are premised on existing tax policies and a conservative outlook for economic growth, the newspaper said.
They also assume that the government will stick to its goal of halving the primary deficit by fiscal 2015 and achieving a primary surplus in fiscal 2020, the business daily said.
The forecasts also factor in proposed expansion of benefits for the youth and low-income individuals, growth in social security expenditures as well as spending to maintain the government's 50 percent contribution to the basic pension program, the Nikkei added.
In terms of the consumption tax, these outlays add up to a rate of about 3 percent, and another 2-4 trillion yen in revenue would be needed to cut the primary deficit by half, the paper said.
($1 = 81.610 Japanese Yen)
(Reporting by Aniket Basu in Bangalore;Editing by Prem Udayabhanu)