Japan OKs tax hike; PM faces election pressure

AP News
Posted: Aug 10, 2012 6:51 AM
Japan OKs tax hike; PM faces election pressure

TOKYO (AP) — Japan's parliament passed a bill Friday to double the country's consumption tax over the next three years as opposition parties increased their pressure on Prime Minister Yoshihiko Noda to call fresh elections to prove he still has the public's support.

Noda, who is sagging in the polls after just 11 months in office, has said he was willing to stake his career on getting the tax hike passed — and even promised opposition lawmakers he would call elections soon so they would back it.

The hike and a package of related legislation were approved in the upper house of parliament by a fragile coalition of Noda's ruling party and two of its main rivals. Both are now calling for snap elections to be held as soon as next month.

Noda and other supporters say the tax increase, from 5 to 10 percent, will boost government revenues as Japan tries to deal with its swollen national debt, which is the largest in the developed world. They also say the package will shore up Japan's social security system, which faces growing strains as the nation is rapidly aging.

Noda said supporting the tax hike was a painful political decision, but that it was an unavoidable measure Japan must take to secure its future economic stability. He added that the debt crisis in Europe has shown what happens when a country loses its financial credibility, and said Japan should not allow that to happen.

"We have reached a point where we must urgently secure revenues for our social welfare system," Noda said. "Someone must bear the burden for this growing cost."

But opponents say it will stifle economic growth and put more of a burden on the average household. It is the first consumption tax hike in 18 years.

To keep the opposition parties from jumping ship, Noda promised he would dissolve the more powerful lower house of parliament and call elections "sometime soon" to demonstrate his increasingly unpopular administration still has a public mandate.

Though Noda on Friday refused to set a clear date for the lower house elections, some analysts believe his party is now vulnerable to gains by the opposition because of voter dissatisfaction with his handling of the nation's recovery from last year's earthquake and tsunami, his waffling over Japan's nuclear policies, and the country's weak economy.

The party or coalition that controls the lower house generally decides who to install as prime minister.