Japan to end key social programme, may pave way for passage of bills

TOKYO Aug 4 (Reuters) - Japan's ruling party agreed with the opposition to scrap a banner programme it touted when it swept to power two years ago, domestic media reported on Thursday, in a move that could pave the way for further compromises enabling the passage of bills Prime Minister Naoto Kan said must be passed for him to resign.

The ruling Democratic Party reached an agreement with the leading opposition Liberal Democratic Party (LDP) and the New Komeito Party to scrap a child allowance programme, one of the key campaign pledges that helped it take power in 2009, media reports said.

The opposition had said that compromise from the Democrats on the child allowance scheme, which it criticises as wasteful, would be necessary for it to help pass key bills through a divided parliament.

"We got over one mountain. If we go over three or four more hills, then we will naturally start seeing our goal," said the LDP's secretary-general, Nobuteru Ishihara.

Unpopular Kan, under fire for his handling of the nuclear crisis triggered by the massive March 11 earthquake and tsunami, has cited the passage of a deficit bond issuance bill and two other bills as conditions for keeping a promise to resign.

But the opposition warned that hurdles remain for it to be able to back the bills, saying the Democrats should also review key programmes such as making high school tuition free.

The child allowance scheme, via which children under high school age receive monthly payments from the government, will be discontinued in fiscal year 2012.

The old child-care programme will be revived in its place. Under that, the age limit for children eligible for allowances will be lower and households exceeding a certain annual income will also be ineligible.

The ruling party initially wanted to set the pre-tax household annual income ceiling at 11.5 million yen ($149,500) but agreed to lower it to 9.6 million yen.

($1 = 76.89 Japanese Yen) (Reporting by Shinichi Saoshiro and Yoko Kubota; Editing by Joseph Radford)