Japan close to decision on tax cuts package

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TOKYO (Reuter) - The Japanese government will decide on the details of an economic stimulus package by the middle of next week after enacting bills promising sweeping political reforms, according to a leader of Japan's ruling coalition.

Chief Cabinet Secretary Masayoshi Takemura, head of one of the coalition parties, said yesterday in a televised debate that the package would include firm figures for proposed income tax cuts.

'We are aiming for around January 20,' he said when asked when the government would decide on the contents of the promised economic package.

The eight-group governing coalition hopes to pass long-promised political reform legislation before or around 20 January, leaving it free to focus on economic measures.

Japan needs a stimulus package that, at minimum, combines tax cuts of 6,000bn yen ( pounds 36bn) and public works spending of Y5,000bn to lift the country out of its economic slump, a senior Economic Planning Agency official said on Friday.

But Yoshiro Mori, secretary- general of the opposition Liberal Democratic Party, said the government needed to slash income taxes by Y10,000bn to ignite growth in Japan's worst downturn for 20 years.

According to a report over the weekend in Nihon Keizai Shimbun, a leading financial daily newspaper, the finance ministry is planning to sell government-held shares in NTT, the telecommunications company, and raise liquor and tobacco taxes to offset planned income tax cuts.

In the past 17 months, Japan's economic stimulus measures have totalled Y30,000bn, with most of the emphasis on its traditional cure for an ailing economy - increased spending on government construction projects.

Work on the package has already been delayed by internal wrangling in the ruling alliance.

The finance ministry and some coalition parties want to reduce income taxes this year and raise the 3 per cent consumption or sales tax some time next year.

But the Socialist Party, the largest force in the coalition, has strongly opposed a sales tax increase.

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