Japan PM Obuchi says tax cuts to vary by bracket
Thursday August 6, 12:53 am Eastern Time
By Elaine Lies
HIROSHIMA, Japan, Aug 6 (Reuters) - Prime Minister Keizo Obuchi said on Thursday his promised income tax cuts
would vary according to people's tax brackets.
At a news conference during a visit to western Japan to mark the 53rd anniversary of the atomic bombing of Hiroshima,
Obuchi said he would ask parliament to approve tax cuts worth more than six trillion yen ($41.3 billion).
''I think an across-the-board cut is the principle of it, but (we must) give consideration to people in tax brackets
suffering the most difficulties,'' Obuchi said, without specifying which groups he would favour.
Obuchi has previously said the tax cuts he envisions, which would lower the top marginal rate, should also seek to help
middle-income people earning about seven million yen per year.
He said he would submit legislation to the next regular session of parliament, expected to start in January, to suspend the
budget-cutting fiscal reform law in order to pay for the tax cuts.
''The fundamental idea is to promote fiscal reform, but we must focus all our efforts on economic recovery, so I would
like to suspend the fiscal reform law for the time being,'' he said.
The law, revised once by its author, ex-premier Ryutaro Hashimoto, forces the government to slash the budget deficit to
within three percent of gross domestic product by March 2006 and to eliminate the issuance of deficit-financing bonds
by then through annual cuts.
Obuchi last week replaced Hashimoto, who quit to take responsibility for the ruling party's disastrous showing in July
parliamentary elections that were seen as a referendum on Hashimoto's management of the recession-wracked
economy.
Obuchi offered no other revelations on the promised tax cuts, a key demand from Japan's trading partners and financial
markets, which see a recovery of the world's second-biggest economy as key to boosting the entire troubled Asian
region.
Obuchi is to formally seek the tax cuts in his first policy address on Friday to an extraordinary session of parliament.
Finance Minister Kiichi Miyazawa has said the premier would seek income and corporate tax cuts worth ''substantially''
more than six trillion yen, and one newspaper has said they would reach seven trillion yen.
Financial markets held out expectations on Thursday that the speech would please investors. Tokyo stocks were down
modestly in the morning, but received support on hopes that the government would swiftly carry out its plans to cut
taxes and resolve banks' bad-loan problems.
On fixing the distressed banking sector, the other focal point in trying to right the economy, Obuchi said the government
would seek to establish accountability of banks' management after getting a full picture of their loan problems.
Financial markets fear a deadlock on key financial bills between Obuchi's Liberal Democratic Party (LDP) and the
biggest opposition group, the Democratic Party, given the LDP's setback in the Upper House elections, which left it far
short of a majority in that chamber.
Obuchi said he wanted the six bills enacted as quickly as possible and that it was necessary to avoid bogging parliament
down in a fight between the LDP and the opposition.
But, he said, ''The LDP submitted the bills in the view that there is no other way, so I hope the parliament will respond
in full recognition of this.''
Miyazawa, by contrast, has stressed flexibility in seeking compromise on the bills, saying there is much room to find
common ground. The Democrats, who accuse the LDP of seeking to protect banks and indebted construction firms
with their bills, have offered their own counter-proposals.
($1 equals 145 yen)
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