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Friday, Oct. 21, 2011
DPJ yields on maturity of reconstruction bonds
New Komeito differs from LDP, backs tobacco tax hike as Diet reconvenes
By NATSUKO FUKUE and MASAMI ITO
The ruling Democratic Party of Japan offered to compromise on Tohoku reconstruction bonds Thursday, sending the opposition camp a signal it is willing to be more flexible as an extraordinary Diet session kicked off earlier in the day.
At the heart of the deal is New Komeito's proposal to extend the redemption period for the bonds to 15 years from 10 so the government can spread the repayment burden over a longer period.
"(The reason we decided to extend it) is because we don't have a majority in the Upper House and both the LDP and New Komeito requested the extension," DPJ policy chief Seiji Maehara said after meeting with his opposition counterparts.
The DPJ desperately needs the opposition's help to pass a third extra budget and tax bills to finance the rebuilding of the disaster-battered Tohoku region.
New Komeito has proposed extending the redemption period to between 15 and 20 years; the Liberal Democratic Party wants it to be 60 years.
The two parties plan to discuss the proposal further with other party executives, Maehara said.
The compromise may drive a wedge into the New Komeito-LDP alliance. The conservative LDP is more reluctant to accept DPJ compromises on bond and tax issues.
"I think the DPJ gave a certain amount of consideration to the LDP and New Komeito," New Komeito policy chief Keiichi Ishii said of the move.
LDP policy chief Toshimitsu Motegi only said his party believes a longer term is necessary.
While the LDP appears to be keeping its distance from DPJ policies for now, New Komeito seems to be warming to them.
On Wednesday, New Komeito leader Natsuo Yamaguchi said on a prerecorded TV program that the Buddhist-backed group is willing to accept a tobacco tax hike proposed by the DPJ. The LDP has firmly opposed hiking the tobacco tax.
New Komeito was originally opposed to another tobacco tax hike, but Yamaguchi said it is better to avoid relying too much on other levies' revenues, noting: "If the government doesn't increase the tobacco tax, where are we going to secure the source of financing from? It's better to avoid depending too much on the income tax and corporate tax."
Under the government's tax hike plan, revenues would rise by ¥2.2 trillion by putting a new ¥2 tax on each cigarette.
Motegi meanwhile said discussions on which taxes to raise should be held only after the parties agree on the redemption period for reconstruction bonds.
"There are various reconstruction businesses that involve long-life social infrastructure, and we think that a longer redemption term is necessary," the LDP's Motegi said. "There still remains a gap and I think we will need to hold further discussions."
New Komeito's about-face came after the DPJ accepted some of its policy proposals in an apparent bid to gain support in the divided Diet, which has been mired in petty infighting despite an unprecedented national crisis triggered by the March 11 disasters.
The government and the ruling party also accepted New Komeito proposals Friday to add ¥136 billion to the ¥12 trillion third extra budget to fund renovations to make public school buildings more quake-resistant.
Meanwhile hundreds of tobacco farmers rallied at the LDP's headquarters in the Nagata-cho district Thursday afternoon to vent their opposition to tax hikes.