Bloomberg News

Noda’s ‘Biggest Hurdle’ Is Passing Social Welfare, Tax Bills

January 04, 2012

(Adds formation of new party in eighth paragraph.)

Jan. 4 (Bloomberg) -- Japan’s Prime Minister Yoshihiko Noda said revamping the country’s tax and social welfare system is his top legislative priority of the year as he struggles to overcome opposition to doubling the sales tax by 2015.

“Our biggest hurdle is the unified reform of social security and taxes,” Noda said in Tokyo at his first press conference of the year. “This is something we can no longer postpone.”

Noda’s Democratic Party of Japan last week proposed raising the 5 percent consumption tax to 8 percent in April 2014 and 10 percent in October 2015 to help pay for soaring welfare costs as the population ages. Nine DPJ lawmakers left the party in revolt and the main opposition Liberal Democratic Party called for an election before considering legislation on the issue.

Japan is struggling to rein in the world’s largest debt while rebuilding from the March earthquake and tsunami that caused the meltdown at the Fukushima nuclear power plant. Noda’s popularity has fallen since he became the country’s sixth premier in five years in September, and polls show voters are divided over whether to raise the consumption tax.

Noda, who intends to submit the sales tax bill to parliament before the fiscal year ends in March, said today he wants to open negotiations with opposition parties next week. He told a former prime minister last week that he will dissolve the lower house and call an election should his sales tax bill fail, the Sankei newspaper reported yesterday, citing unidentified sources close to Noda.

Aging Society

The world’s most rapidly aging society and two decades of low growth have saddled Japan with debt projected to exceed 1 quadrillion yen ($13 trillion) in the current fiscal year. Standard & Poor’s said in November it was considering lowering the country’s sovereign rating, already cut in January, 2011 to AA-, given the lack of progress in tackling the debt burden.

Noda today also said he aims to improve cooperation with the Bank of Japan to defeat deflation.

The nine DPJ defectors today announced the formation of the new Kizuna Party. Party head Akira Uchiyama said Kizuna will work with the DPJ “on a case-by-case” basis.

Noda’s approval rating dropped to 31 percent from 40 percent last month, according to an Asahi newspaper poll published Dec. 13. The phone survey of 1,655 voters taken Dec. 10-11 didn’t provide a margin of error.

--Editors: John Brinsley, Nicholas Wadhams

To contact the reporters on this story: Sachiko Sakamaki in Tokyo at Ssakamaki1@bloomberg.net; Takashi Hirokawa in Tokyo at thirokawa@bloomberg.net

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


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