Japan launches new panel on social security, tax reforms

Tokyo, Feb 5 (Kyodo) The government launched a new panelof experts today to support Prime Minister Naoto Kan''s effortsto strengthen Japan''s social security system, an initiativethat could be followed by a tax hike to cover its revenueshortfalls.

Kan, who chairs the new panel, has said he will seekcomprehensive reforms as he tries to make the country''swelfare system more sustainable at a time when the populationis aging and annual new debt issuance by the government issurpassing its tax revenues.

The panel, which involves ministers as well asrepresentatives from businesses, labor unions and academia,will play a key role in Kan''s efforts to compile a reform planby his self-imposed deadline of June.

It is widely believed that the panel, through hearingsand debates, will aim to reach a public consensus on raisingthe consumption tax in several years'' time, although doing socould adversely impact the economy by slowing privateconsumption and weakening the corporate appetite for freshcapital spending.

Discussions will effectively revolve around Kaoru Yosano,economic and fiscal policy minister who strongly advocatesincreasing the sales tax rate from the current 5 per cent tocover swelling social security costs, which amount to morethan half of the government''s key policy spending.

Yosano, a defector from the once-dominant LiberalDemocratic Party, joined the Cabinet following a call by theprime minister, head of the Democratic Party of Japan, fornonpartisan talks. The opposition camp, however, has largelygiven a lukewarm reaction to Kan''s initiative, and hascriticized Yosano''s entry into the government.

Other members of the panel include Hakuo Yanagisawa,president of Josai International University and a former LDPwelfare minister. He has proposed that revenues from theconsumption tax be used only for financing welfareservices.

Another member, Yutaka Narita, top advisor to Japan''slargest advertising agency Dentsu Inc., used to chair asimilar panel set up under a previous LDP-led government,while Taro Miyamoto, a law professor at the graduate school ofHokkaido University, is known for his study of socialsecurity systems in northern Europe. (Kyodo)