The Democratic Party of Japan, the largest opposition party, on Thursday unveiled its own economic stimulus package. It’s worth nearly 20 trillion yen and includes a system that would provide allowances for raising children but has little chance of being included in a supplementary budget to be debated during an upcoming extraordinary Diet session.
That’s because the ruling Liberal Democratic Party has been busy forming alliances with smaller opposition parties that will allow it to overcome its minority standing in the Upper House and get its legislative agenda passed.
The LDP’s lack of an Upper House majority in the previous Diet session gave the DPJ a chance to wield some power, and it responded with a compromise on bank recapitalization bills that its legislators partially drafted, much to the delight of many economists.
But that’s not likely to happen with the DPJ’s latest prescription for the ailing economy. Eisei Ito, DPJ policy affairs chief, told a news conference that the party’s package was drafted with an eye on promoting structural reforms.
The package calls for a total 6.3 trillion yen in income and corporate tax cuts. A total of 4 trillion yen in income tax cuts would come from a uniform 2 percentage point cut and from raising the minimum level of taxable annual income from the current 3.3 million yen to 4 million yen.
It also calls for lowering the corporate tax rate to a quasi-international standard level of 40 percent, as well as introducing other tax incentives for those who purchase houses or cars.
In an effort to ease the financial burden on the public, the package calls for lowering pension premiums by increasing the state’s contribution to the basic pension program to one-half from the current one-third.
It also suggests the abolition of the current system of tax exemptions for dependents and creating a new system to provide allowances for children.
Under the new system, monthly allowances of 10,000 yen per child would be paid to families with an annual income below 12 million yen until their child becomes 18 years old. The allowances would double for the third child.
By combining the income tax cuts and providing allowances for children, the financial burden on middle- and low-income people would be eased, the DPJ says.
Although calls for lowering the consumption tax are mounting within and outside the party, the DPJ decided to oppose a cut. Lowering the rate temporarily from the current 5 percent to stimulate the economy involves too many political difficulties, and raising it again would be difficult, it said.
The package also calls for 7 trillion yen worth of public works projects that focus on information infrastructure, housing in large cities and environmental facilities.
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