Japan Proposes Earthquake Relief Tax Plan

The Japanese government has agreed to temporarily increase income taxes and other taxes to raise around $120 billion to pay for reconstruction after the earthquake and tsunami last March.

Officials with the ruling Democratic Party of Japan decreased the tax hike in the final version of the plan over concerns about Japan’s slow economy, the Mainichi Daily News reported.

The plan will raise individual income tax for 10 years starting in January 2013 and encompasses a three-year corporate tax starting in April 2012.

The government is also looking into issuing special reconstruction bonds to help finance the budget but new Prime Minister Yoshihiko Noda said these bonds should be serviced via temporary tax hikes, which differs from how conventional bonds are dealt with.

Japan is planning to sell off its shares of Japan Tobacco Inc. and other companies, which will secure around $26.2 billion, The Financial Times reported.

The government will reduce its share in Japan Tobacco from around 50 percent to about a third within the next five years, according to the Times.

Reconstruction costs are expected to cost Japan around $250 billion over the next five years.