Aug. 2 (Bloomberg) -- Japan's new finance and economy ministers said the government can't rely on faster economic growth to achieve its goal of balancing the budget by 2011, indicating they may support higher taxes.

``Considering last year's tax revenues and those anticipated for this year, it will be very difficult to balance the budget by 2011 from growth alone,'' Economic and Fiscal Policy Minister Kaoru Yosano told reporters in Tokyo today. The government ``may not have enough time to achieve the goal'' by relying on quicker growth for revenue, Finance Minister Bunmei Ibuki said.

Prime Minister Yasuo Fukuda appointed Ibuki and Yosano yesterday as part of a Cabinet reshuffle to regain popularity and amid concern that economic growth is faltering. The government will probably miss its goal of balancing the books by the year ending March 2012, according to a Cabinet Office report last month. Japan has the world's largest public debt.

``We must not postpone our goal of reaching a primary balance by 2011, however we have been unable to achieve the growth we anticipated in 2006,'' Yosano said. He estimated that the government will be 3.9 trillion yen ($36 billion) short of the target, which excludes debt servicing and bond sales, by March 2012.

Japan should double the 5 percent consumption tax by 2015 to help pay for rising social welfare costs as the population ages, Yosano said in an interview in May, when he headed the ruling Liberal Democratic Party's fiscal policy panel.

`Deep Consideration'

``We have a responsibility to make judgments with a deep consideration for not only the life and economic activity of the people in the present, but also for the future,'' he said today.

The government needs to present its tax-reform plans within the next two to three years, Ibuki said.

When asked whether the government will raise taxes next fiscal year, he said any decision ``depends on the state of the economy, tax revenues, political judgment, how much we can get from the road tax and how much we can cut spending.''

Road and gasoline taxes will be used for general spending from the year starting April, rather than for road construction.

The government will need to weigh the prospect of a general election within the next 12 months when it considers whether to increase the sales tax. The last prime minister to raise the tax, Ryutaro Hashimoto, had to resign after the 1997 increase resulted in an election defeat for the LDP.

Sapped Income

Record costs for energy and other commodities have sapped corporate profits and household income, causing tax revenue to fall short of the government's estimate for a second year. The Finance Ministry last week set a cap on general spending at 47.8 trillion yen, 1.1 percent higher than the current period.

Yosano, who is in charge of the Cabinet Office, the agency that formulates the government's economic policy, said he plans to consult with other ministries on ways to help businesses and households facing rising costs.

Consumer prices excluding fresh food climbed 1.9 percent in June from a year earlier, the fastest pace in a decade. Wholesale inflation is at a 27-year high.

``Japan's inflation is triggered by rising energy, food and materials prices overseas rather than domestic factors,'' Yosano said.

The economy is in a ``tough situation,'' Ibuki said.

Exports, production, household spending and wages all declined in June, highlighting concern that Japan may already be in a recession. The world's second-largest economy probably shrank at an annual 2.3 percent rate last quarter, economists estimate gross domestic product figures will show on Aug. 13.

Morgan Stanley last week cut Japan's 2009 growth estimate to 0.2 percent and said a ``deepening recession'' was possible.

To contact the reporters on this story: Toru Fujioka in Tokyo at tfujioka1@bloomberg.net; Jason Clenfield in Tokyo at jclenfield@bloomberg.net.

Last Updated: August 2, 2008 03:47 EDT