Chief Cabinet Secretary Yasuo Fukuda sounded a hopeful note Tuesday that tax cuts could be introduced by the end of March.

Members of the ruling coalition want tax cuts this fiscal year, while Prime Minister Junichiro Koizumi has yet to make his position public.

“We think it is important to iron out (an antideflationary package) with the ruling bloc” by taking into consideration the calls for tax cuts by the end of the current fiscal year,” Fukuda said.

He also stressed the need to study how to finance the tax cuts if the government and ruling coalition agree to introduce them.

Key ruling coalition policymakers are demanding that tax cuts be introduced in the current, not the next, fiscal year, in an effort to stoke an economic rebound.

However, it remains unclear whether Koizumi will agree to a plan that would force him to abandon his pledge to limit the issuance of new government bonds to 30 trillion yen, a policy promise that shaped the fiscal 2001 and 2002 budgets.

The political turf war that has ensued between Koizumi and key members of the ruling coalition has become a fight not over tax cuts but how they should be paid for.

Fukuda made the comments as the ruling coalition, led by Koizumi’s Liberal Democratic Party, stepped up efforts to complete an “antideflation package” by Thursday.

He also said the government may study introducing an environment tax as a longer-term reform owing to reduced business-sector opposition to the idea.

Referring to remarks made Monday by Japan Business Federation Chairman Hiroshi Okuda that an environment tax could be considered, Fukuda said, “The possibility should be studied on various occasions in the future.”

Fukuda did not elaborate on the administration stance.

Okuda, who heads Japan’s largest business lobby, said the business sector must take a mid- and long-term view and examine the possibility of a green tax, a sharp departure from the business lobby’s usual policy.

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