The government and the Liberal Democratic Party-led ruling camp are considering extending the tax incentive program for housing loan borrowers, in a bid to cushion the impact from next October’s rise in the consumption tax, according to informed sources.

The discussion is focused on a proposal to extend the eligibility period for the tax break by up to five years from the current 10, the sources said.

The step is under consideration as part of measures to curb an anticipated decline in spending after the consumption tax is raised to 10 percent from the current 8 percent, especially for big-ticket items like houses and cars.

Also behind the move are calls for the program’s expansion from the housing industry, which is concerned about a possible fall in demand as condominium prices are on the rise amid surges in labor costs and construction material prices.

Currently, the program deducts the amount equivalent to 1 percent of the borrowers’ year-end loan balances from their income tax payments for up to 10 years. The upper limit of the balance is set at ¥40 million.

The proposed extension is expected to be implemented in combination with lowering the loan balance upper limit, the sources said.

A senior official of Komeito, the LDP’s junior coalition partner, has expressed the party’s readiness to accept a lower upper limit, saying that “it’ll be fine as long as the burden on consumers decreases as a whole.”

For fiscal 2018, the program is expected to push down the government’s income tax revenue by some ¥670 billion.

Some LDP lawmakers are cautious about expanding the program due to worries over its impact on tax revenues.

“The current system already has a certain positive effect,” a LDP lawmaker said.

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