Quadrillion yen problem
Japan's public debt has just topped 1 quadrillion yen - 1,000 trillion yen, or about $10 trillion. At more than twice Japan's GDP, it is the heaviest debt burden among industrialized nations. Simply servicing the debt pile eats up nearly a quarter of the budget.
(Read more: Japan'sdebt looks like this: 1,000,000,000,000,000 yen)
For now, Japan's welfare program appears well within international norms. It amounted to 22.3 percent of GDP in 2010, versus 19.8 percent for the United States, 23.8 percent for Britain and 27.1 percent for Germany, according to the Organisation for Economic Cooperation and Development.
But welfare spending is exploding as the population ages. Moreover, the official figures may under-represent the problem, as Japanese companies, due to strict labor regulations, keep on their payrolls millions of employees whose skills are no longer of use.
It is difficult to measure the number of these "hidden unemployed", but a government scheme to support companies that have fallen on hard times subsidized salaries for 4.6 million people last fiscal year - just over 7 percent of the workforce.
Assuming Abe decides to raise the sales tax next year and then carries through with the second increase to 10 percent in 2015 - a big if - the levy will bring in 13.5 trillion yen a year, the Finance Ministry reckons.
Against that, the government is spending 29 trillion yen this fiscal year on welfare. That could balloon to almost 35 trillion yen in three years, according to the ministry.
Policymakers have taken some steps, but they appear at best only likely to slow the spending growth a bit.
(Read more: Japanese Women at Work? Traditionalists Say No)
The government wants to use 10.8 trillion yen of the annual sales tax revenue to pay for welfare costs for the elderly and plug a shortfall in the pension system.
Seniors will see the out-of-pocket burden of their outpatient costs double to 20 percent in April, just as the unpopular tax hike hits. And the government is raising the retirement age in steps to 65 from 60, although the shift won't be complete until 2030.
While many analysts worry that the pace is too leisurely, there is no indication the government has the appetite to change things more quickly.
"The worry is that the government will lose its incentive to cut spending once it sees a pick-up in tax revenue," said Hiroshi Miyazaki, senior economist at Mitsubishi UFJ Morgan Stanley Securities.
"The government is focused more on higher economic growth and higher tax revenue. I don't expect reforms to focus on contributing greatly to fiscal discipline."
Indeed, the fiscal-reform plan allocates around 2.7 trillion yen in new tax revenue to improving daycare facilities and pensions for the poor, an attempt to soften public opposition to welfare cuts.
The government also wants to expand the pension system to cover more part-time workers, but there are not enough details about the plan to estimate how much this could offset the expected savings.
If Abe tries to have it both ways, he could hamper progress in reducing the pension burden, hamstringing his long-term budget goals.