The Liberal Democratic Party's top policymaker on Tuesday called for setting mid- to long-term time frames for raising the consumption tax beyond the current 5 percent.

"When we should hike the (consumption) tax is a point we should pay attention to," said Taro Aso, chairman of the LDP Policy Research Council. "There is a range of opinions, such as hiking the tax rate by 1 percentage point every year, or hiking it by 2 points or 5 points once every several years."

On Friday, Prime Minister Junichiro Koizumi said his administration plans to "make the consumption tax issue a subject of discussion a matter of course" when starting debate on taxation changes early this year.

Aso added, "There has been criticism of Japan's taxation system since it was altered on the recommendation of (then Columbia University professor Carl) Shoup" in the 1950s.

Shoup recommended Japan increase its dependence on direct taxes such as corporate and individual income taxes in relation to indirect levies such as sales taxes.

As a result, the national treasury has depended on direct taxes for a major part of its revenues for decades. In the 1980s, more than 70 percent of tax revenues came from direct taxes. The consumption tax was introduced in 1989.

Meanwhile, Aso backpedaled on a long-held position that the government should postpone the abolishment of full guarantees on deposits at failed banks, scheduled for April 1. Aso had urged the government to defer for two years the imposition of a 10 million yen per-depositor limit.

In December 1999, the government delayed imposing the limit until April 1, for time deposits, and April 1, 2003, for ordinary deposits out of fear that the move would cause teetering banks to collapse.

The limit, part of a restructuring plan to force banks to clean up their balance sheets and lend more prudently, was originally scheduled to go into effect on April 1, 2000.

Aso said Tuesday it may be too late for the government to amend the Deposit Insurance Law in view of the approaching April 1 change.

"It is difficult to amend the law at this stage," he said. "But it is necessary for us to devise safety nets in advance."

He said the government should pump public funds not only into major "city" commercial banks and regional banks, but also into "shinkin" banks and credit unions if a panic develops that triggers runs at "healthy" banks.