By Tomasz Janowski
TOKYO (Reuters) - Japan's Prime Minister Yoshihiko Noda said on Saturday he had no intention to call an early election any time soon and saw some promising signs that an elusive agreement with the opposition on his tax hike proposals was still possible.
"In the continuing parliament debate, I believe that we've started to click with the opposition party. As such, with the support of both parties, I hope to submit this law as soon as possible and have debate in order to pass the law," Noda told foreign media.
"We intend to not just debate in parliament, but continue to hold talks between the ruling and opposition parties in order to pass the law. So I believe that it is too early to talk about dissolving parliament anytime soon."
Leaderships of both parties agree on the need to raise the sales tax from the current level of 5 percent, one of the lowest among the industrialized nations, as a first step toward reining in Japan's ballooning debt worth twice its annual economic output. But both face considerable internal opposition and a skeptical public.
Kyodo news agency reported on Friday, citing political sources, that officials from the ruling Democrats and the main opposition Liberal Democratic Party were discussing a deal under which the opposition would back the tax proposals in return for early polls.
But Noda suggested he was still holding out hope that an agreement could be struck based on the merits of the plan rather than political horse-trading.
"We are confronted with an ageing society and declining birthrate unprecedented in history of humankind and we cannot side-step this challenge and I believe all political parties fully understand that," Noda said.
The opposition has been trying to leverage its control of the parliament's upper house to pressure Noda to bring forward a lower house election that need not be held until the second half of next year.
According to Kyodo, senior executives from Noda's party and the LDP discussed a possibility of forming a grand coalition or cooperation on selected policies on the condition that Noda would dissolve parliament before its session ends on June 21.
So far Noda has signaled he wanted to pass the tax and social security bills before considering calling an election, while the opposition insisted anyone who wanted to raise the tax should first seek a renewed mandate from voters.
(Reporting by Tomasz Janowski; Editing by Sanjeev Miglani)