"We will discuss whether it would be a good idea to leave untouched" the special deductions, Shinichiro Furumoto, a parliamentary secretary for finance, said at a news conference after attending a meeting of the government's tax panel.

The review is likely to take place partly because the government led by the Democratic Party of Japan is planning to make high-school tuition effectively free from the year starting next April as part of its efforts to increase household incomes.

The government is finding it necessary to eliminate overlapping features between existing tax deductions and its key promises focused on boosting domestic demand.

Under the current system, the amount to be deducted from income is up to 630,000 yen annually for families with children in that age bracket in consideration of increasing burden from education costs.

Furumoto, a DPJ lawmaker, is one of the central members of the panel, which consists of Cabinet ministers and is now the sole decision- making body for tax reforms.

The advisory panel to Hatoyama is accelerating discussions toward the end of this year to make it ready to revise part of the Japan's taxation system in fiscal 2010.

In a related development, some of the ministers said earlier this month the government may scrap income tax deductions for dependents in fiscal 2010.