Bloomberg News

Japan’s Ruling Party Proposes Tax Plan as Some Members Rebel

December 28, 2011

(Adds analyst comment in fourth paragraph.)

Dec. 28 (Bloomberg) -- Japan’s ruling party proposed a plan to double the sales tax by 2015 over the objection of lawmakers who have threatened to quit the group as Prime Minister Yoshihiko Noda struggles to lead an economic recovery.

The Democratic Party of Japan’s plan will raise the tax from 5 percent to 8 percent in October 2013, and to 10 percent in April 2015, lawmakers Takeshi Miyazaki and Motoyuki Odachi told reporters in Tokyo after leaving the meeting. Nine DPJ members submitted their resignation today, said Shinji Tarutoko, acting secretary general of the DPJ.

The rebellion over tax issues may dent Noda’s public support rating though it won’t immediately undercut his ability to pass legislation, said Steven R. Reed, a professor of political science at Chuo University in Tokyo. Noda is struggling to revive an economy hindered by the March earthquake and nuclear disaster and burdened by the world’s largest debt.

“The Democrats losing nine votes in the lower house doesn’t make any difference in the government,” Reed said by telephone today. “But the key to having a party that gets things done is to look like you’re getting things done.”

The panel met today in Tokyo to comply with instructions from Noda, who is currently in India, to finalize its stance this week.

Little Progress

An aging population and two decades of low growth have saddled Japan with debt projected to exceed 1 quadrillion yen in the current fiscal year. Standard & Poor’s said last month it was mulling lowering the country’s sovereign rating, already cut in January to AA-, as Noda’s government makes little progress at tackling the burden.

“We’re at a historical juncture,” Hirohisa Fujii, head of the DPJ tax panel, told lawmakers today. “What kind of action was taken by whom will be recorded in history.”

Today’s lawmaker revolt follows Japan’s opposition- controlled upper chamber earlier this month censuring two of Noda’s ministers and threatening to boycott the next Diet session unless they are fired. The non-binding motions against Defense Minister Yasuo Ichikawa and Consumers Affairs Minister Kenji Yamaoka were submitted by the Liberal Democratic Party and New Komeito party.

--Editors: Patrick Harrington, Drew Gibson.

To contact the reporters on this story: Sachiko Sakamaki in Tokyo at ssakamaki1@bloomberg.net; Kyoko Shimodoi in Tokyo at kshimodoi@bloomberg.net

To contact the editor responsible for this story: Peter Hirschberg at phirschberg@bloomberg.net


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