Prime Minister Keizo Obuchi, head of the ruling Liberal Democratic Party, and Liberal Party leader Ichiro Ozawa agreed Monday their parties should continue discussing a possible alliance, but a key sticking point is the LDP's opposition to cutting the consumption tax.
It would be difficult for a coalition to be formed before an extraordinary Diet session -- expected to convene Nov. 27 -- because of the wide gap between the two parties over a consumption tax cut.
During a 30-minute meeting, Obuchi asked Ozawa to strengthen cooperation between the two parties. The move is seen as a desperate effort by the LDP to alleviate its minority standing in the Upper House.
However, Ozawa, who has been critical of the LDP's economic measures, said his party wants the 5 percent consumption tax lowered to zero for the time being as a means to boost now-sagging personal consumption. The Liberal Party wants the tax lowered to zero until the economy picks up, and then to raise it every year. It is also calling for dedicating consumption tax revenues to fund welfare programs.
Ozawa told reporters after the meeting that he did not press Obuchi to accept the Liberal Party's position on the levy. Most LDP members, including those in favor of forming a coalition with the Liberal Party, oppose a consumption tax cut, and Obuchi suggested the two parties continue discussions on the issue, to which Ozawa agreed.
The two also agreed to hold talks on other key policy issues, such as security and social welfare.