Japan Is Considering Income Limit on Child Allowance, Noda Says

Japan’s Finance Minister Yoshihiko Noda said the government is considering income restrictions on child-care allowances for the year starting April, reversing a pledge to avoid a cap on eligibility.

“The question is how to fund” the 240 billion yen ($2.9 billion) annual cost of increasing to 20,000 yen the monthly handout for children under 3, Noda said on NHK television today. “Although this may go against what we’ve been saying in principle, income restrictions” may be an option, he said.

Noda’s comments highlight the difficulty Japan faces in seeking to broaden its social safety net, while containing the largest debt burden among countries in the Organization for Economic Cooperation and Development. The government’s fiscal strategy announced in June prohibits the implementation of policies for which funding hasn’t been found.

The Democratic Party of Japan-led government provides a monthly allowance of 13,000 yen for children until they finish junior high school. The party pledged to increase the payout to 26,000 yen for fiscal 2011 when it came to power last year. The Nikkei newspaper reported the government agreed yesterday to raise the payout by 7,000 yen for children under 3.

“People with small children are struggling, and we’ve decided to focus on this generation,” Noda said today. He didn’t specify what the earnings cut-off would be for families to be eligible for the payouts if a restriction is implemented.

Noda also reiterated a pledge to keep new bond sales within this fiscal year’s record 44 trillion yen.

“The ceiling is 44 trillion yen, but my hope is that it will be less than that,” Noda said.

To contact the reporter on this story: Aki Ito in Tokyo at aito16@bloomberg.net

To contact the editor responsible for this story: Paul Tighe at ptighe@bloomberg.net

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