Sensing the will for reform, financial markets have responded generally favorably to Prime Minister Yasuo Fukuda's proposal to free up road-related taxes for other purposes in fiscal 2009, but rural economies already suffering from cuts in public spending risk further damage, analysts say.
Attempting to avoid further political and market turmoil, Fukuda proposed Thursday that revenue from gasoline and other road-related taxes be used for general spending, including environmental protection and support for families with children, starting in April 2009.
This marks a significant move for Japan, where for decades road-related taxes have been set aside almost exclusively to build and repair roads.
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