Prime Minister Junichiro Koizumi and New Komeito leader Takenori Kanzaki signed a new policy agreement Tuesday in preparation of kicking off their two-party ruling coalition led by the Liberal Democratic Party in the special Diet session that starts Wednesday.

During the brief Diet session, Koizumi, president of the LDP, is certain to be re-elected prime minister as the ruling alliance retained a stable majority in the 480-seat House of Representatives in the Nov. 9 general election.

The New Conservative Party, the third member of the LDP-led alliance, has agreed to be absorbed by the LDP following its election setback and will officially disband as a party Friday.

Under the policy agreement, the LDP and New Komeito confirmed that the government burden of public pension costs will be raised to 50 percent from the current one-third, but they did not touch on the pending issue of when to raise that burden or how to finance it.

The government is now in the final stage of working out its pension reform plan, which will be decided by the end of this year, but opinions are widely divided among various ministries that have a stake in the pension reform.

The LDP and New Komeito also have differences, with the LDP hesitant about any tax hike to finance an increase in the burden while New Komeito is calling for raising the income tax.

"We will accelerate our discussion on pension reform between the ruling parties and the government in order to reach a conclusion," LDP Secretary General Shinzo Abe said after the meeting between Koizumi and Kanzaki.

The agreement includes a target of 2 percent nominal growth in fiscal 2006, privatization of postal services in April 2007 and privatization of public expressway operators in fiscal 2005, which were all included in the list of pledges the LDP made during the general election.

However, they did not touch on the LDP's aim to revise the Constitution or the Fundamental Law of Education because New Komeito is hesitant about these issues. Such policy differences may affect the fate of the ruling alliance, as the LDP has pledged to unveil its blueprint for revising the Constitution in 2005.

"Of course, we have different policies because we are different parties," Abe said. "But we are forming a coalition to have a stable government and that is producing results for reform and economic recovery. In that process, we will also discuss our calls for revisions of the Constitution and the Fundamental Law of Education."

Kato returns to LDP

Staff report

Former LDP Secretary General Koichi Kato officially returned to the fold Tuesday, almost two years after leaving the Liberal Democratic Party due to a scandal-tainted aide. Kato, 64, successfully ran as an independent in the general election for the House of Representatives.