TOKYO (Reuters) – Japan’s minority ruling coalition on Wednesday gave into a key opposition party’s demand to increase tax exemptions for some households, a move that may underpin consumption but strain the country’s already tattered finances.
The Liberal Democratic Party and its coalition partner Komeito agreed with the opposition Democratic Party for the People (DPP) to “strive towards” raising the tax-free income threshold to 1.78 million yen ($11,742) from the current 1.03 million yen, according to a joint statement posted on X by DPP.
Details will be decided based on further discussion among party lawmakers, the statement said.
After its defeat in a general election held in October, Prime Minister Shigeru Ishiba’s ruling coalition needs the support of DPP to pass through parliament state budget and tax reform measures.
DPP has argued that the 1.03-million-yen threshold constrains student part-time workers as their parents lose a tax deduction treatment if their dependent minors earn beyond the level.
A government estimate showed that the threshold hike to 1.78 million yen would reduce tax revenue by 7 trillion yen to 8 trillion yen ($46 billion-$53 billion), which would add to Japan’s already ballooning public debt.
($1 = 151.8300 yen)
(Reporting by Leika Kihara; Editing by Kim Coghill)
