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Child-rearing benefits face ax / Handouts to be abolished to free up funds for quake reconstruction

The government and the ruling Democratic Party of Japan are set to abolish the child-rearing allowance system in October, which could free up some of the huge funds needed for earthquake disaster reconstruction efforts, according to sources.

The current stopgap legislation maintains the payment of 13,000 yen per month for each child through September. The government and the DPJ have begun coordinating on legislative moves to abolish the system when the period expires, having judged it would be difficult to secure fiscal resources to finance the allowances after last month's Great East Japan Earthquake, the sources said.

Child benefits, however, would continue based on the previous system of dependent child allowances with income caps, introduced during the administration of the Liberal Democratic Party and its coalition partner New Komeito, with some modifications, according to the sources.

The DPJ-led administration, which came to power in 2009, introduced the child-rearing allowance system in 2010 under a law enacted as temporary legislation effective for fiscal 2010.

For this fiscal year, the government submitted a bill to the current Diet session to raise the amount of payments for households with children under 3 years old to 20,000 yen per month. But it gave up on efforts to enact the legislation due to resistance from the opposition camp.

With support from the opposition Japanese Communist Party and the Social Democratic Party, the government passed the stopgap legislation to keep the same level of payments from last fiscal year through September.

However, the government and the DPJ have decided to give priority to disaster reconstruction funding. Continuing the current payment system after September would cost about 1.1 trillion yen, the sources said.

If and when the current child allowance system is abolished or allowed to expire, the previous system of income-capped dependent child allowances, based on a permanent law, would automatically be reinstated.

Komeito, which wants the previous system revived, has proposed modifying the system, such as uniformly setting payments at 10,000 yen per month and imposing no income caps on residents in disaster-hit areas. Under the previous system, the payments were 5,000 yen or 10,000 yen per child depending on certain conditions regarding the age and number of children targeted. The Komeito proposal is expected to cost about 600 billion yen.

The government and the DPJ are considering using the Komeito proposal as a basis and allocating the other 500 billion yen in a second supplementary budget for this fiscal year, which is expected to be devoted exclusively to disaster reconstruction measures.

Some DPJ executive board members are even calling for a shift to the previous system before October, to curb the issuance of deficit-covering government bonds in the envisaged second extra budget.

(Apr. 14, 2011)
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