Parties agree to raise support for under-3s

The Yomiuri Shimbun

The ruling Democratic Party of Japan and the two major opposition parties have basically agreed to boost financial support for households with children under the age of 3, as some such households would otherwise see their after-tax income decline once the current child-rearing allowance program is abolished in favor of an older system.

The DPJ, the Liberal Democratic Party and New Komeito agreed last month to abolish the child-rearing allowance program. The government plans to reintroduce a previous allowance system for children in October.

The three parties are now holding working-level talks to finalize the details. They are aiming toward giving from 13,000 yen to 15,000 yen per month to households with children under the age of 3, sources close to the parties said. Households with children aged from 3 through middle school age would receive 10,000 yen a month, the sources said.

The idea to give households with children under the age of 3 a higher sum was prompted by the loss of certain tax deductions for dependents aged up to 15. This is likely to result in lower after-tax income for households with children under 3 once the older allowance system replaces the current one.

The income tax deduction for dependents in this age group ceased in January, while the residential tax deduction will no longer be available from June 2012. When the old allowance system is revived, therefore, households with children aged under 3 will see their net income decline from what they received when they were eligible for the current child-rearing allowances up through fiscal 2009.

Under the current child-rearing allowance system, all households are eligible for a monthly payment of 13,000 yen per child, regardless of their income.

Both the LDP and Komeito agreed in May to provide households with children up to the age of 15 with a monthly child allowance of 10,000 yen--with an income ceiling for eligibility--and to abolish the present child-rearing allowance system by September.

However, it was later found that 10,000 yen a month would mean lower after-tax income for households with children under 3 and a yearly income from 3 million yen to 8 million yen.

For instance, households with an annual income of 5 million yen to 8 million yen would lose up to 8,625 yen in monthly net income in fiscal 2012, or more than 100,000 yen over the entire fiscal year.

To correct this situation, former Health, Labor and Welfare Minister Chikara Sakaguchi proposed giving a monthly allowance of 15,000 yen to households with children under the age of 3. Sakaguchi is a member of Komeito.

If the idea is realized, households with a yearly income of up to 5 million yen and with children under the age of 3 will see their net annual income increase through fiscal 2012. Households whose annual income is from 5 million yen to 8 million yen would see a smaller decline.

During talks with Sakaguchi on Thursday, DPJ Secretary General Katsuya Okada agreed to boost the allowance for households with children aged under 3. Both the LDP and Komeito are said to agree, in principle, with Sakaguchi's proposal.

Yet some within the DPJ leadership are calling for the child allowance for households with children aged under 3 to be set at 13,000 yen a month, and for households with children aged 3 and older to receive 10,000 yen.

Advocates of this position want to get as much money as possible for post-disaster reconstruction efforts out of the 2.7 trillion yen allocated for child allowances for fiscal 2011, but nevertheless do not want to establish an income ceiling.

Discussions among the three parties may have rough going in the days ahead over exactly how much the additional sum should be.

In its bill to implement the child allowances for fiscal 2011, the DPJ originally planned to add 7,000 yen on top of the uniform 13,000 yen for households with children aged under 3. Its intention was to lessen the financial burden for households adversely affected by the revival of the previous allowance system, but the DPJ withdrew the bill as it met with resistance from opposition parties.

Instead, the ruling party enacted a law to extend the present provision of 13,000 yen a month through September.