Sales tax hike key issue in Japan's upper house election+

TOKYO, June 17 Kyodo -
Japan's main ruling and opposition parties on Thursday unveiled their policy
pledges for next month's upper house election, with both putting the focus on
fiscal consolidation and considering debating the viability of raising the
country's sales tax rate to around 10 percent in the years ahead.
The Democratic Party of Japan, which took power last September, listed fiscal
restructuring goals that need to be achieved immediately, and over the medium
and long terms.
Among things to ''put right now,'' the DPJ said it will begin holding
cross-party talks on drastically reforming the country's tax system, including
a potential hike in the 5 percent consumption tax rate.
The DPJ said the talks will be ''aimed at reaching a conclusion at an early
date'' after the House of Councillors election on July 11.
The main opposition Liberal Democratic Party in its platform, also released
Thursday afternoon, proposed raising the consumption tax to 10 percent to cover
a shortfall in funding for social welfare programs.
Prime Minister Naoto Kan, who heads the DPJ, said the LDP's proposal of
doubling the rate will be ''one of the references,'' when he spoke at a news
conference to unveil the policies.
This is the first time that Kan, who became Japan's top leader last week, has
made specific mention of a new sales tax rate.
Kan said he is hoping that the government's tax panel will decide on a new rate
for the tax by the end of March.
He said that when to raise the rate largely depends on how quickly the ruling
party can build a consensus among a cross-party group of lawmakers.
But at the same time, Kan said such an important issue must seek public
response, indicating whether to give the green light to the hike must not be
finalized before the next election of the more powerful lower house, which will
be held by the summer of 2013.
Koichiro Gemba, the DPJ's policy chief, who attended the same news conference,
said it will require at least two years of preparations before raising the tax,
so the hike would not come until the fall of 2012 even if the party wins enough
support from other parties in this fiscal year through next March.
Backtracking from last year's campaign pledges of generous spending plans, the
DPJ stated that new policies ''in principle'' will not be implemented without
cutting current expenditures or generating new revenues.
The DPJ said it will ''put all its efforts'' into keeping government bond
issuance in the initial budget for fiscal 2011 below 44.3 trillion yen, the
level planned for fiscal 2010.
The DPJ highlighted that ''strong finances'' are an essential prerequisite for
Japan to revive itself.
The DPJ has committed itself to halving the primary balance deficit by fiscal
2015 and achieving a surplus in the balance by fiscal 2020, which would mean
expenditures, excluding debt-servicing costs, would be covered by revenues
without issuing new debt.
The LDP's targets for fiscal consolidation over the medium and long terms are
on par with those of the ruling party.
The DPJ has also decided to revise some of its key pledges for last year's
general election campaign, such as abandoning a plan to provide 26,000 yen in
monthly child allowances for each child of junior high school age or younger
starting in fiscal 2011, due to budgetary constraints.
In its latest platform, the DPJ, which has begun providing 13,000 yen per child
in June under the allowance program, said it will provide something extra on
top of the current amount.
Instead of increasing the amount of cash payments, the DPJ is considering
enhancing public child-care services in accordance with the needs of each
community.
In another step to shrink the allowance system, the party said it plans to
limit recipients to people whose children are living in Japan, starting in the
next fiscal year. The parents of children living abroad have been eligible to
the benefits under certain conditions.
The DPJ is hoping to achieve average nominal economic growth of over 3 percent
and real growth of more than 2 percent in the years through fiscal 2020, while
the LDP will aim to achieve nominal growth of 4 percent in the next three
years.
As part of measures to boost the economy, the two parties said they plan to
reduce Japan's corporate tax rate, one of the highest in the world.
The LDP is recommending that the effective rate of Japan's corporate tax,
currently about 40 percent, be reduced to the 20-plus percent range. But the
DPJ did not say by how much it will cut the rate.
The parties are also vying with each other over efforts to accelerate political
reforms.
The DPJ said it plans to cut the number of Diet seats by 80 in the 480-member
House of Representatives and by around 40 in the 242-seat upper house. It did
not mention by when the Diet seats should be reduced.
The LDP said it aims to reduce the total number of seats in the chambers by
about 30 percent to 500 in six years' time.
Earlier in the day, the DPJ and its junior coalition partner, the People's New
Party, consulted over their partnership for the election, through which the
coalition bloc is hoping to win enough seats to retain a majority to avert
policy deadlock.
LDP leader Sadakazu Tanigaki, meanwhile, said, ''It's the LDP's mission given
by voters to break the majority control of the ruling parties.''
''We will win without fail,'' Tanigaki said at the party's election campaign
headquarters. He has said he will step down as party leader if the opposition
camp fails to strip the ruling bloc of its majority in the upper house.
==Kyodo
2010-06-17 23:48:39