No sales tax-hike talk until after Upper House poll

Kyodo News

The Cabinet of Prime Minister Shinzo Abe will not start full-fledged debate on possible increases in the consumption tax until the fall of next year, Finance Minister Koji Omi said at a news conference Tuesday.

The remark suggests the Abe Cabinet will shelve debate on tax hikes, including the consumption tax, ahead of the Upper House election next summer.

Omi said the government should focus on spurring growth and revitalizing business to improve public finances, citing Abe’s campaign slogan, “No economic growth, no fiscal reconstruction.”

Omi, a veteran Liberal Democratic Party lawmaker, said he may consider reviewing the corporate tax system to ensure Japan’s international competitiveness.

“We are not talking about rebuilding the state finances in one year or two,” Omi said at a news conference. “It will take several years to ensure growth in the Japanese economy and to boost its competitiveness, which in turn will lead to tax revenue increases and generate a positive cycle.”

Omi said the Finance Ministry will “thoroughly review and cut spending” as it puts together a draft budget for fiscal 2007. The draft is to be published in December.

Omi also said the ministry plans to cap the issuance of new bonds in the fiscal 2007 budget “below” 30 trillion yen, underscoring the new Cabinet’s efforts to meet budgetary needs without issuing too much debt.

The bond cap is the same target set by former Prime Minister Junichiro Koizumi.

On monetary policy, Omi, a former science and technology minister, said he wants to improve communications with the Bank of Japan but does not think it is a good idea for the government to intervene in the central bank’s policymaking.

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