• Kyodo News

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The Democratic Party of Japan is preparing to support a fiscal consolidation bill proposed by the Liberal Democratic Party in hopes of paving the way for cross-party talks on tax and social security reform, administration and DPJ sources said.

Prime Minister Naoto Kan has been strongly supportive of the bill, which was submitted in October, one of the administration sources said.

The bill demands that tax reform and other legislative actions be taken by fiscal 2011 to secure a stable source of funding for social security, including pension benefits and health care, as well as for steps to tackle the falling birthrate.

By supporting the bill, the DPJ also hopes for cooperation from the LDP and other opposition parties for the fiscal 2011 budget and related bills.

It is rare for a ruling party to back a bill prepared by an opposition party, especially when it would lead the administration to lose full control of fiscal management.

It remains uncertain whether Kan and the DPJ can eventually decide to go all the way with the bill, given objections from some senior party members. Those not in favor worry that if it is enacted, a politically sensitive consumption tax hike would become unavoidable.

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