The Democratic Party of Japan yielded to the opposition camp Tuesday and agreed to redeem the bonds for financing the reconstruction of the Tohoku region in 25 years.
The agreement came after the DPJ compromised on the redemption period, extending the government’s original plan of 10 years to 15 years last month and then to 25 years on Monday, as the Liberal Democratic Party claimed the period should be 60 years and New Komeito said 15 to 20 years was better.
DPJ Secretary General Azuma Koshiishi, after meeting his counterparts in the LDP and New Komeito, confirmed that they also agreed to pass by the end of this month the third extra budget, worth ¥12.1 trillion, to finance efforts to help the Tohoku region recover from the March 11 quake and tsunami.
The extension of the redemption period means the tax burden can be spread over a longer period, a setback for Prime Minister Yoshihiko Noda, who had wanted to avoid pushing the burden on to future generations.
“We must prioritze enacting the budget with a consensus,” Finance Minister Jun Azumi said after a morning Cabinet meeting, because the DPJ, which doesn’t hold a majority in the Upper House, desperately needs cooperation from the opposition camp to pass the budget and its related bills.
Regarding the extended redemption period, Azumi said that “25 years means a quarter of a century, so it’s the maximum.”
Meanwhile, tax policy chiefs of the three parties will begin discussing which taxes should be raised.
The DPJ-led government is keen to boost the tobacco tax by ¥2 per cigarette, which it estimates would mean an increase of ¥2.2 trillion in revenue.
New Komeito has been flip-flopping on hiking the tobacco tax. Although the party was supportive of the tax hike last month, party leader Natsuo Yamaguchi said Tuesday morning that “there is no need to stick to” a tobacco tax hike, which is in line with the LDP’s opposition to raising that tax.
Observers say allowing the government a longer period for debt repayment will help lessen the number of taxes subject to the temporary hike, and the DPJ will be able to forgo the tobacco tax increase, to the LDP’s satisfaction.
The DPJ-led government plans to pass the third extra budget in the Lower House on Thursday, a day before Noda departs for the Asia-Pacific Economic Cooperation forum summit, and approve it on Nov. 17.
Information from Kyodo added