Photo/Illutration Itsunori Onodera, right, policy chief of the ruling Liberal Democratic Party, meets on Nov. 8 with Makoto Hamaguchi, his counterpart in the opposition Democratic Party for the People. (Nozomi Matsui)

The ruling coalition has agreed to consider a tax proposal from an opposition party to help it form a majority in the Diet.

The ruling Liberal Democratic Party and junior partner Komeito suffered a crushing defeat in the Oct. 27 Lower House election, pushing them into a minority and forcing them to turn to opposition parties to continue their hold on government.

On Nov. 8, the ruling coalition agreed to include the opposition Democratic Party for the People in future discussions about the taxation system.

The focus of those discussions will be the DPP proposal to raise the threshold at which personal income is taxed. It currently stands at 1.03 million yen ($6,700). The DPP would raise it to 1.78 million yen.

Itsunori Onodera, the LDP policy chief, and his Komeito counterpart Mitsunari Okamoto met separately on Nov. 8 with Makoto Hamaguchi, the DPP policy chief.

The discussions on the taxation system may begin in the coming week.

In the Nov. 8 meetings, the DPP formally presented its proposal to raise the minimum income at which personal income tax is applied.

Onodera proposed setting up a forum among the three parties that would include the chair of each party’s tax research commission.

Okamoto told reporters after his meeting with Hamaguchi that there were elements in the DPP proposal to which Komeito could agree.

But a major problem for the ruling coalition is how to overcome the decrease in tax revenues that would result from a higher minimum income.

The decrease in tax revenues, including local taxes, could total between 7 trillion and 8 trillion yen, according to preliminary projections.

As some in the ruling coalition called for lowering the minimum income from the DPP proposal, the focus within the ruling coalition will be the extent to which it compromises to gain support in the Diet from the DPP.

For his part, DPP head Yuichiro Tamaki brushed aside concerns that his party’s proposal would lead to a huge gap in tax revenues.

“We need to think about ways to kickstart the economy through an increase in salaries (by raising the level of tax-exempt income) and the subsequent increase in tax revenues,” Tamaki told a Nov. 8 news conference.

(This article was written by Yuta Ogi and Tsuneo Sasai.)

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