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Size of economic stimulus package to be 6 tril. yen

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(Globalpost/GlobalPost)

The size of the government's upcoming stimulus package to buffer the economy from a planned sales tax hike next year will be 6 trillion yen, including 1 trillion yen in tax cuts to stimulate corporate investment, officials said Monday.

Prime Minister Shinzo Abe will unveil the stimulus package Tuesday as he also announces his decision to raise the consumption tax rate to 8 percent next April from the current 5 percent as legislated, the officials said.

Abe, who is eager to prevent the tax hike from hurting Japan's nascent economic recovery, met Finance Minister Taro Aso and economic and fiscal policy minister Akira Amari on Monday at the prime minister's office to put the final touches to the package.

Amari told reporters after the meeting that Abe asked the two ministers to work for consensus between the government and the ruling parties on the details of the package.

The government plans to specify ending a special corporate income tax surcharge for reconstruction of quake-tsunami devastated areas, in a move to prompt companies to boost wages, the officials said.

In a draft of its economic stimulus package, the government says the corporate tax cut through abolishing the surcharge one year earlier than scheduled will help companies "take one step toward continuous wage increases," one official said.

Abe's administration will also pledge in the package that the Ministry of Economy, Trade and Industry will survey wages at major corporations and disclose the results, they said.

The surcharge on individual income tax will be retained as ending it would hamper government efforts to rebuild areas ravaged by the March 2011 disaster, the officials said.

In the draft, Abe's administration urges companies to play a key role in revitalizing the Japanese economy, including the disaster-hit regions, by paying higher wages to their employees.

The government will also promise to provide the money necessary for reconstruction work through a supplementary budget for the current fiscal year ending March 2014.

Abe's Liberal Democratic Party supports ending the corporate tax surcharge ahead of schedule, but many lawmakers of the LDP's coalition partner the New Komeito party have opposed the move out of concern over the possible negative impact on reconstruction.

Abolishing the three-year surcharge one year earlier than scheduled is estimated to reduce government revenues by around 900 billion yen.

The sales tax hike is aimed at covering swelling social security costs for Japan's graying population, as the nation's fiscal health is the worst among major developed economies, with public debt totaling more than 200 percent of gross domestic product.

Under legislation enacted August last year, the consumption tax rate is slated to be lifted to 10 percent in October 2015.

==Kyodo

http://www.globalpost.com/dispatch/news/kyodo-news-international/130930/size-economic-stimulus-package-be-6-tril-yen