Japan economy package stuck on income tax cut rift
Economics Minister Kaoru Yosano said the cabinet wanted to compile the package by the end of the week, though the government had not yet decided its size or how it should be funded.
The New Komeito party, the junior member of the ruling coalition, upped the ante by stepping up its call for an income tax cut for those on low incomes, an idea not favoured by many in its partner the Liberal Democratic Party.
New Komeito policy chief Natsuo Yamaguchi said he told Yosano the government needs to include a cut in income tax. "We will seek to reach an agreement on this with grave resolution," he told reporters.
His comments came as speculation simmered that New Komeito, a partner of the LDP for nearly a decade, was growing unhappy with Primer Minister Yasuo Fukuda.
LDP policy chief Kosuke Hori said on Monday it was hard to include tax cuts in the package, which he said could be worth 2-3 trillion yen ($18-27 billion).
He did not specify if he meant new spending or if the figure included non-spending measures such as special loan facilities.
Ministers have said they do not want to issue extra government bonds to fund the package, given that Japan is already saddled with huge public debt amounting to 1½ times GDP.
Government officials have taken pains to say the package is intended to provide relief to households and companies struggling with steep costs and will not be a return to the massive public spending projects of the past.
Asked if issuance of debt-financing bonds would be needed to finance it, Finance Minister Bunmei Ibuki said: "The prime minister has said he wants to avoid such issuance, so it is a cabinet minister's job to seek that."
Ibuki told a news conference the debate on how to fund the package would include the possibility of compiling an extra budget, although the prime minister had not asked him to do so.
The possibility of an extra budget is in focus because the government could fund it by reallocating existing spending or tapping into reserves rather than issuing debt, depending on its size.
Yosano reiterated that he wanted to avoid more bond issuance but added: "It will depend on whether we have steps that need to be implemented even if that will entail borrowing."
Some ruling party officials have suggested the government could use reserves held in special accounts - so-called "hidden treasure" - to fund the package so as to avoid issuing new debt-covering bonds.
Yosano said he would meet Ibuki and Chief Cabinet Secretary Nobutaka Machimura on Wednesday to discuss the package details.