The ruling Liberal Democratic Party's powerful tax policy panel decided Wednesday to scrap plans to raise taxes on cigarettes and low-malt "happoshu" in fiscal 2002, LDP officials said.

The decision by the LDP's Tax System Research Commission reverses a decision the day before by the LDP and its two coalition partners.

On Tuesday, the LDP, New Komeito and the New Conservative Party gave informal approval to raising the cigarette tax from 7 yen to 9 yen per cigarette in April.

They had abandoned the idea of raising the tax on happoshu to the same level as beer, but still pushed for doubling the tax to 20 yen per 350 ml bottle.

Finance Minister Masajuro Shiokawa said Wednesday he will respect the LDP tax panel's decision.

Last week, Shiokawa expressed caution over the proposal to hike the happoshu tax, saying the entrepreneurial spirit of those who developed the beverage should be respected.

He also said there is a need to pay attention to national sentiment against the happoshu tax hike.

Reform talks earlier

Prime Minister Junichiro Koizumi on Wednesday asked a senior official of the Liberal Democratic Party tax panel to bring forward debate on tax reform for fiscal 2003.

The LDP panel, which has had a powerful say in tax reform, usually begins discussing the upcoming fiscal year's tax matters around November of the preceding year.

"I would like to see tax debate reflected in the drafting of the fiscal 2003 budget," Koizumi said after meeting Sadanori Yamanaka, a supreme adviser to the LDP's Tax System Research Commission.

Yamanaka reportedly replied it is "a good idea" when asked by Koizumi to start discussions on tax reform in February instead of in the fall.

Koizumi has said he intends to drastically change the way the talks have been held by having the Prime Minister's Office take the initiative and holding the talks at an earlier date.