DPJ shelves tobacco tax hike to appease opposition

by Natsuko Fukue

Staff Writer

The ruling Democratic Party of Japan on Thursday postponed its plan to raise the tobacco tax, a compromise intended to win the opposition camp’s support over the passage of budget-related bills.

Hirohisa Fujii, who heads the DPJ’s tax panel, agreed to suspend moves to hike the tobacco tax in a meeting Thursday with the tax policy chiefs of the Liberal Democratic Party and New Komeito, the two largest opposition parties.

The government plans to raise about ¥9.2 trillion of the ¥12.1 trillion allocated in the third extra budget for fiscal 2011 — which cleared the Lower House on Thursday — through tax increases.

Prime Minister Yoshihiko Noda’s Cabinet last month approved a plan to increase the price of tobacco by hiking the tax on each cigarette by ¥2, aiming to raise an additional ¥2.2 trillion in tobacco-related revenues. But LDP members, many of whom rely on the support of tobacco farmers, have fiercely resisted the plan.

“I don’t think the DPJ should be trying to raise the tobacco tax just because it’s an easy target” compared to other taxes that could be hiked, said LDP tax panel chief Takeshi Noda after the meeting with Fujii.

New Komeito initially supported the DPJ’s plan to hike the tobacco tax, but its leader, Natsuo Yamaguchi, announced Tuesday that the party no longer sees the need for such a measure.