The government will set aside some ¥200 billion to realize a key pledge to raise monthly child allowances, sources said Monday.
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The Finance and welfare ministries have agreed after intense discussions that the government will reduce tax deductions for salaried workers and others to secure the funds to cover the pledge to raise the allowance to ¥20,000 per month from the current ¥13,000 for children aged under 3.
The issue had been a sticking point in the government's efforts to work out a draft later this month of the state budget for the next fiscal year starting in April and to outline the country's tax reform plans for fiscal 2011.
On the child care benefits, the government has apparently withdrawn an earlier pledge to pay ¥26,000 a month to all children from fiscal 2011 until they graduate from junior high school, normally at the age of 15. This reflects Prime Minister Naoto Kan's resolve to restore Japan's fiscal health, the worst among major developed economies.
Other issues requiring government debate include a proposal to reduce corporate income tax and help improve the competitiveness of Japanese companies.
The proposal, strongly backed by the Ministry of Economy, Trade and Industry and business leaders, would cut the effective rate of tax by 5 percentage points from the current 40 percent, relatively high by international standards and believed to have undermined corporate appetites for capital spending.
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