The ruling Liberal Democratic Party put the final touches April 23 to the 16 trillion yen worth of economic stimulus measures to be endorsed by the government today, which will include about 10-trillion yen in “real-water” measures that require direct government outlays.
The package will feature an additional 2 trillion yen in temporary income and residential tax cuts and 260 billion yen in expanded tax deductions, according to LDP officials. But Prime Minister Ryutaro Hashimoto was still having trouble securing Cabinet consensus on how to revise the Fiscal Structural Reform Law, which binds the government to an austere fiscal policy, due to resistance from Health and Welfare Minister Junichiro Koizumi.
The law stipulates that deficit-covering bond issuances need to be reduced every year so that by fiscal 2003 the government does not issue any such bonds. It also places spending caps on key expenditure areas.
The government is moving to revise the law so the year-on-year reduction of deficit-covering bond issues can be suspended in the event the economy deteriorates further. Some LDP officials also suggested that the fiscal 2003 target year be pushed back to fiscal 2005 — an idea which Vice Finance Minister Koji Tanami did not oppose during a news conference in the afternoon.
The Conference on Fiscal Structural Reform is to convene today to approve the legal revisions mapped out by the prime minister and the government is to formally release the package later in the day.
Necessary outlays will be covered by a supplementary budget for the current fiscal year, which the government plans to compile and submit to the Diet next month. Koizumi, who had opposed revising the fiscal austerity law, demanded that if the law were to be changed, the limits it places on social welfare spending should also be scrapped.
Meanwhile, the LDP’s Research Commission on the Tax System agreed on details of the tax revisions to be included in the package. A single-income household comprising a couple and two children would get 72,500 yen in tax rebates from the income tax cuts in the package. When added to the 2 trillion yen in similar tax cuts currently being implemented, the government would collect a total of 137,500 yen less in tax from such a household in calendar 1999.
The cuts in national-level taxes would begin in August, while local-level residential taxes would be slashed from June, panel officials said.
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