Prime Minister Shinzo Abe has said he will seek to introduce reduced consumption tax rates on daily necessities and other items at the same time the tax rate is increased to 10 per cent in April 2017.
In an interview Wednesday with The Yomiuri Shimbun, Abe said he would make the plan a shared campaign pledge between the ruling Liberal Democratic Party and its junior coalition partner Komeito for the next House of Representatives election.
The LDP's Research Commission on the Tax System will consider what items should be subject to reduced rates. Commission Chairman Takeshi Noda and Komeito deputy leader Kazuo Kitagawa met at the Diet building on Wednesday and agreed the two parties would aim to introduce reduced consumption tax rates in April 2017.
A draft for campaign promises based on the agreement stipulates that, with the aim of introducing reduced tax rates in fiscal 2017, the two parties will quickly make concrete discussions on such issues as the list of items subject to reduced tax rates, sectional accounting and stable financial resources, according to sources.
"They're apparently discussing making the issue a common election pledge if the experts come to an agreement," Abe said during the interview.
The two parties agreed at the end of last year that reduced consumption tax rates would be introduced when the tax rate was 10 per cent, and Komeito called for introducing the reduced rates at the same time the tax rate was to be hiked to 10 per cent in October 2015. But the LDP was reluctant, saying it would be difficult to design the system in time.
Abe announced he would delay the planned second consumption tax hike for about 1½ years, which resolved the time constraints.
The government and the ruling parties reportedly are considering including a plan to introduce the 10 per cent consumption tax rate along with the reduced tax rates in a tax system reform outline for fiscal 2015.
Regarding the items subject to reduced tax rates, Abe said, "That's a technical subject, so I'd like the Research Commission on the Tax System to discuss the issue."
Meanwhile, there are concerns that delaying the second hike in the consumption tax rate will lead to insufficient financial resources for social security reforms.
Abe said, "I emphasise child-rearing support," suggesting he would start a new child-rearing support programme in April 2015 as initially planned.
But he added: "We can't do everything on the menu to improve social security systems. We will closely examine tax revenues."
Abe also stressed that the government would firmly maintain its goal of restoring fiscal health: "The government will overcome deflation and increase tax revenues while we will carry out thorough administrative and financial reforms. We will promote efforts to make the nation's social security more efficient and rationalized."
As for economic policies the government will compile before the end of this year, Abe said he would emphasise boosting consumer spending and raising the levels of regional economies.
"The economic policies will include such measures as supporting inventive measures taken by different municipalities, vitalizing regional economies through supporting local specialties and other measures, and establishing an emergency response system such as disaster reconstruction," Abe said.