The deadlocked tax reform debate took a small step forward Friday, when Finance Minister Masajuro Shiokawa stated that he is ready to relinquish some national income tax revenue to give local governments room to raise residence taxes.
Shiokawa indicated he may be prepared to give local governments greater budget-control powers and slim down the size of the national budget, in line with requests made by Prime Minister Junichiro Koizumi last year.
The transfer of tax-raising powers to prefectural governments is one of the so-called Trinity Reform package, which also involves reducing the central government's subsidies for local governments and reviewing of the system under which tax grants are allocated to local governments.