Photo/Illutration Yuichiro Tamaki, a key member of the Democratic Party for the People, speaks to reporters at the Diet on Dec. 18. (Nozomi Matsui)

Under pressure, the ruling coalition agreed to raise the minimum income tax threshold from 1.03 million yen ($6,600) to 1.23 million yen, after negotiations stalled with the key opposition Democratic Party for the People.

The change is set to be included in the tax reform framework for the next fiscal year, which is expected to be finalized shortly by the ruling Liberal Democratic Party and its coalition partner, Komeito.

This decision follows extensive discussions with the DPP, which had called for a more substantial increase to 1.78 million yen.

The DPP argues that the increase is crucial in easing the tax burden on lower-income earners.

However, the gap between the two sides proved too wide, making it unlikely that a compromise would be reached by the end of the year.

As a minority government, the ruling coalition has been seeking an agreement with the DPP as its support is essential in passing the fiscal 2025 budget proposal in the hung parliament.

However, negotiations broke down on Dec. 17 when the LDP and Komeito failed to present a new proposal on the income tax threshold, sparking frustration from the DPP.

Amid time pressure, the ruling bloc is now moving forward with its plan to finalize the tax reform framework on Dec. 20; otherwise it will fail to complete the fiscal 2025 budget proposal by the end of the year.

Without an agreement with the DPP, the framework will stipulate that the threshold will be raised to 1.23 million yen, with no further increase.

The DPP remains steadfast in its opposition.

"If they proceed without an agreement, we cannot support their budget proposal," said Yuichiro Tamaki, a key member of the DPP.

As the budget deadline approaches, the ruling parties will continue talks with the DPP, while also exploring potential alliances with other opposition parties, including Nippon Ishin (Japan Innovation Party).

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