TOKYO (REUTERS) - Japan is set to miss a 2021 budget-balancing goal by more than US$100 billion (S$125 billion) even with a planned tax increase, a draft government estimate showed, raising the political pressure for more tax hikes or spending cuts.

The 11.0 trillion yen (S$133 billion) shortfall for the fiscal year to March 2021, forecast in the estimates seen by Reuters on Tuesday, highlights the difficulties facing Prime Minister Shinzo Abe in curbing public debt of more than twice the nation's GDP, the biggest debt burden in the industrial world.

Mr Abe is trying both to stimulate the long-sluggish economy and to begin curbing the government's runaway debt. His government took the biggest fiscal-reform step in 17 years by raising the sales tax to 8 per cent from 5 per cent in April.

The premier must decide by around year's end whether to proceed with a plan to raise the tax to 10 per cent.

The Cabinet Office's draft estimate assumes the further tax increase, underscoring the need for additional belt-tightening by boosting revenues or slashing welfare and other spending in the fast-ageing society.