30 October 2008

Aso to table new economic stimulus package - Kyodo

Prime Minister Taro Aso is to unveil a new economic stimulus package later Thursday to tackle fallout from the global financial crisis, featuring 2 trillion yen in cash benefits to be delivered to all households by the end of March to support people's livelihoods.

The overall size of the package is expected to be worth up to 25 trillion yen, including other such key elements as boosting the scale of tax breaks for homeowners on housing loans, extending the preferential treatment for tax levies on capital gains and cutting regional expressway tolls.

The package is expected to involve 5 trillion yen in fresh state fiscal spending. To finance the stimulus steps, the premier plans to submit a second supplementary budget for fiscal 2008 to the Diet by late November, according to a senior ruling coalition lawmaker.

The current extraordinary Diet session is subsequently expected to be extended from its scheduled end on Nov. 30, coalition lawmakers said.

The premier is set to finalize the fresh economic package at a meeting of his Cabinet ministers and senior ruling party officials Thursday afternoon.

It will come after the first stimulus measures worth about 11.7 trillion yen, which were compiled in late August to tackle surges in energy and raw materials prices.

As part of the first economic package, a 1.81 trillion yen extra budget for the current fiscal year through next March was enacted earlier this month.

Under the new package, the government plans to expand the scale of tax breaks for those paying housing loans up to 6 million yen over a 10-year period -- the largest on record. The program was originally scheduled to expire at the end of December.

Those who start living in their new home in 2008 can receive a maximum 1.6 million yen in income tax deductions over 10 or 15 years. Tax breaks amounted to maximum 587.5 million yen for homeowners paying housing loans over 15 years starting from 1999-2001.

The additional program is also expected to feature extending the current preferential treatment for tax levies on capital gains for three more years as well as boosting a credit guarantee scheme for small businesses to facilitate their fundraising activities.

As for the cuts in regional expressway tolls, the government plans to reduce the charges to a maximum of 1,000 yen on holidays.

A cut in premiums for the national unemployment insurance program and incentives for companies to hire non-regular, part-time workers as full-time employees will also be included.

To revitalize regional economies, the central government will also divert 600 billion yen to municipalities. The grant will be partly funded by reserves in Japan's special account budgets.

The latest economic measures will involve a mid-term tax reform program to cover ballooning social security costs in rapidly aging Japan.

The government will pledge to implement tax cuts and other economy-boosting measures over the next three years to achieve a recovery, and then to raise consumption taxes from the current 5 percent to secure necessary revenue.

Critics say the new package will require pork-barrel spending and that the ruling Liberal Democratic Party and its coalition partner New Komeito party are trying to woo voters with cash benefits in the run-up to a general election.

In 1999, the government issued gift vouchers worth 700 billion yen in total to stimulate regional economic activity at the request of New Komeito's predecessor.

Contrary to expectations, a government survey conducted later found that, of the shopping coupons that were actually used, only 32 percent contributed to spurring consumption, according to a government survey.

The vouchers were distributed only to households with children aged 15 or younger and bedridden or low-income people aged 65 or older. They were only valid for six months in the city or town where the recipient lived and were not exchangeable for money.

Kyodo news

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