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Saturday, Jan. 24, 2009

Cabinet OKs diluted tax reform bill

Staff writer

Prime Minister Taro Aso got a little breathing room Friday after the Cabinet approved his modified tax reform bill, which now offers an open-ended clause for a future consumption tax hike, while mending an internal rift over the issue in his Liberal Democratic Party.

After being slammed repeatedly for his policy flip-flopping, Aso this time stood his ground as best he could and said he wanted the 5 percent consumption tax raised in fiscal 2011 if the economy had recovered.

In the end, the final wording had to be modified to state that the government would merely make legal preparations for tax reforms, including a consumption tax hike, by fiscal 2011. Aso's proposal to set a specific date for the tax hike was thus obliterated.

"It was not like the government decided to raise the consumption tax in fiscal 2011 haphazardly," Chief Cabinet Secretary Takeo Kawamura told reporters Friday morning.

"We just need to take necessary preparations to use the consumption tax to firmly establish a social security system."

Announcing the possibility of a future tax hike before the next Lower House election drew harsh protests from members of the LDP-New Komeito ruling bloc. One of the key protesters was former LDP Secretary General Hidenao Nakagawa, who hinted earlier this week he might vote against the tax reform bill if it included the provision for a 2011 tax hike.

Nakagawa relented Thursday after the wording was softened, but he has completely isolated himself from his faction, which is led by ex-Chief Cabinet Secretary Nobutaka Machimura.

So far, it appears Aso has managed to avoid the worst-case scenario — splitting his own party. But he has also given more ammunition to the Democratic Party of Japan, the main opposition party.

DPJ Secretary General Yukio Hatoyama on Friday blasted Aso and the LDP for deciding the direction of tax reform without seeking the public's opinion.

"Aso and LDP faction leaders may be relieved, and the young lawmakers who are in danger of losing the next election may think they have managed to deceive" the public, Hatoyama said. "But tax issues should not be dodged with wording."

DPJ deputy chief Naoto Kan also slammed the prime minister for wavering again by agreeing to the vague clause on the tax hike.

"Aso has no leadership," Kan told a news conference Thursday. The provision "isn't a compromise between Aso's opinion and that of the people hinting at a revolt — it was torn apart."

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The Japan Times

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