TOKYO — Prime Minister Yoshihiko Noda said Friday he is staking his political career on doubling the consumption tax to 10% as the cabinet approved a revised bill, overcoming an earlier scare after the head of a coalition partner said it may leave the government over the issue.
The agreement is a step closer to a deal the government says will help rein in Japan’s gigantic public debt, but it is still likely to face a rocky road with opposition to the unpopular tax hike both inside and outside the ruling Democratic Party of Japan (DPJ).
Noda is playing a balancing act between keeping his fragile coalition together and seeing through the bill’s passage.
Noda has warned that the future of the world’s third-largest economy rests on tackling its public debt while financing an increasingly expensive social welfare system.
“We must create a society in which people can be assured that tomorrow will be better than today,” he told a press briefing Friday. “I will stake my political career to achieve the goal.
“We must weigh the sustainability of social security. Everybody has fears about their post-retirement years. We must remove these fears and that is the most important point of this reform.
“Now it is time for the whole Diet to make a decision without any postponement, strictly for the benefit of people.”
The bill was Friday sent to the lower house, which will ultimately pass the legislation or shut it down—a process expected to take several months.
A group of DPJ lawmakers is threatening to vote against it, due mainly to worries that a tax increase would derail Japan’s uncertain economic recovery.
The DPJ’s former head and major political power broker Ichiro Ozawa, who leads the party’s anti-tax group, told local media that he “can’t support a simple tax hike.”
“If Mr Noda pushes for a publicly unpopular tax hike, his party support base will disappear,” Ozawa was quoted as saying.
The opposition, which controls Japan’s upper house, is also unhappy with the bill and could scupper its passage.
The law would see the consumption tax rise from 5% to 10% by 2015.
The expected rise in government revenue is earmarked to cover Japan’s snowballing social welfare costs, including public pensions and a universal health insurance system in a country that boasts one of the world’s highest life expectancy rates.
Only about 40% of what the government currently spends comes from taxes.
The rest is financed by borrowing, leaving Japan’s debt at more than double gross domestic product, dwarfing troubled Greece, with analysts warning that only higher tax revenue or spending cuts can bridge the gap.
source: japantoday.com
