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Japan: Rough Reform Plans for Taxation, Social Security Systems on Way
Source: http://search.japantimes.co.jp/
Source Date: Monday, October 11, 2010
Focus: Institution and HR Management
Country: Japan
Created: Oct 18, 2010

A basic framework for reforming tax and social security systems — including a plan to raise the consumption tax — will be drafted by the end of the year, government sources said Saturday.

The government will set up panel of ministers and other senior lawmakers this month to engage the opposition parties, which have been calling for a blueprint of the reforms. Since the opposition controls the Upper House, cooperation will be crucial if the ruling Democratic Party of Japan expects to pass budget bills for fiscal 2011, which begins in April.

The debates are likely to be difficult, especially since the DPJ's plan to ensure a minimal pension for all workers — one of the pledges it made in the Upper House election in July — still remains sketchy.

The government plans to compile separate measures to strengthen each sector, such as medical care and nursing care, while mapping a way to secure a budget of some ¥2.5 trillion, the amount it needs to keep shouldering half of the nation's basic pension costs.

As for broaching debate on raising the 5 percent consumption tax, a controversial decision that cost the DPJ its majority in the House of Councilors, some members are demanding that any tax hike be clearly designated as a matter of social security.

The review group would include Chief Cabinet Secretary Yoshito Sengoku and Koichiro Gemba, DPJ policy chief who doubles as state minister for national policy.

The Bank of Japan might slash its fiscal 2011 projection for the consumer price index to zero or even negative growth, reversing the 0.1 percent rise it projected in July, sources said Sunday.

The BOJ Policy Board will likely cut its forecast for the core CPI — which excludes volatile fresh food prices — to account for a slowdown in Japan expected from a deceleration in the U.S. economy and the yen's appreciation against the dollar, the sources said.

An officially revised CPI for the year to March 31, 2012, will appear in the semiannual "Outlook for Economic Activity and Prices" report due Oct.28.
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