Finance Minister Masajuro Shiokawa proposed Friday a capital gains tax exemption on securities purchased in 2002 for long-term holding.

The plan is aimed at encouraging stock investors to buy -- rather than sell -- securities for a short term, helping to ease the current selling pressure on the stock market.

Shiokawa floated the idea at a news conference following a Cabinet meeting.

Although details of the plan, along with its technical problems, have yet to be worked out, Shiokawa said the idea had already been approved by Prime Minister Junichiro Koizumi.

Shiokawa said the Finance Ministry, in consultation with the tax panel of the ruling Liberal Democratic Party, has already begun working to incorporate the plan into a package of annual tax code revisions for fiscal 2002. The revisions will be compiled by the end of this year.

"The LDP tax panel has only been focusing on tax incentives for selling shares," Shiokawa said. "We should instead focus on incentives for holding shares."

Shiokawa said his proposed one-year tax plan will apply to purchasers of more than a predetermined amount of securities during 2002. If they hold the securities for a long term -- say, more than two years -- they would be exempt from paying capital gain tax on the sale of the securities. Shiokawa also called for an earlier scrapping of a withholding tax option of the current two-tier capital gains tax system. Shiokawa wants it scrapped in January 2003 rather than waiting until April 2003.

Shiokawa also said he has no objection to the LDP panel's proposal to lower the capital gains tax rate reported in annual income tax returns from the current 26 percent, while retaining the current two-tier system.

"I would not oppose the LDP tax panel if it plans to reduce the current 26 percent to 20 percent," he said.

The government's Tax Commission, however, is against lowering the capital gains tax rate for the reporting method unless the withholding tax option is scrapped first.