Noda tells Maehara to gain DPJ nod for tax hike

Kyodo

Prime Minister Yoshihiko Noda on Monday allowed Democratic Party of Japan executives to revise part of a bill to hike the sales tax, aiming to draw an intraparty consensus on the issue, lawmakers said.

During a meeting with DPJ Policy Research Committee Chairman Seiji Maehara, Noda asked him to make a decision after thorough discussions with the government side, giving the chief DPJ policymaker a free hand on how to form an opinion within the ruling party, the lawmakers said.

DPJ executives are now hoping to declare an intraparty consensus Wednesday to allow the Cabinet to approve the bill next week to raise the 5 percent consumption tax to 8 percent in April 2014 and to 10 percent in October 2015.

A conclusion, however, could be delayed because former DPJ leader Ichiro Ozawa and his allies oppose hiking the sales tax, making it more difficult for Noda to fulfill the pledge he made at the Group of 20 summit in France last year to up the levy.

The Cabinet hopes to approve the bill on March 27 after Noda’s visit to South Korea to attend an international nuclear security summit.

The plan to raise the consumption tax comes as the government is making efforts to restore Japan’s fiscal health, the worst among major developed countries, at a time when public finances are under intense pressure from growing social security spending amid the aging population.

But Ozawa, a chief architect of the DPJ’s ascent to power through the 2009 general election and head of the largest intraparty group, has argued the tax hike could harm the economy, which is struggling to recover from the March 2011 earthquake and tsunami disaster and its aftermath.

The sticking point is whether to include in the bill an additional clause that implies a potential further rise to above 10 percent to meet the nation’s fiscal discipline goal.

Some DPJ lawmakers have also called on the government to specify an emergency scenario under which it would have to shelve the tax hike due to fears that a higher levy would damage consumer and business sentiment.

The lawmakers have stressed that the government needs to show its favored inflation or economic growth rate under which it could support the plan.

During the meeting with Noda, Maehara expressed eagerness to draw an intraparty consensus soon, saying the DPJ has had a “good discussion” and the issue has been “already talked out,” lawmakers said.

Chief Cabinet Secretary Osamu Fujimura said, “For now, it is difficult to say” when the Cabinet will approve the bill.

DPJ lawmakers, meanwhile, are paying attention to whether Noda’s government is trying to form a grand coalition with the Liberal Democratic Party to ensure the passage of the bill to raise the tax.

The matter has attracted attention as Deputy Prime Minister Katsuya Okada has reportedly sounded out the LDP about establishing a coalition with the ruling DPJ, touching on a possible general election.