Tax

Exclusive: Japan's Ozawa warns PM against pushing sales tax hike

Reuters News
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Posted: Mar 15, 2012 3:50 AM
Exclusive: Japan's Ozawa warns PM against pushing sales tax hike

TOKYO (Reuters) - Japanese ruling party heavyweight Ichiro Ozawa threatened to vote against sales tax hike bills to fund bulging social security costs, the latest sign of trouble for Prime Minister Yoshihiko Noda's battle to fix the nation's tattered finances.

Ozawa, 69, a former Democratic Party of Japan leader, told Reuters in an interview that he still hoped Noda would reconsider his plan to enact bills to double the 5 percent sales tax in two stages by October 2015.

Ozawa, who heads the party's biggest faction, declined to spell out precisely what he would do if Noda stood firm.

Noda, who took office in September as Japan's sixth premier in five years, is struggling to bring his fractious party into line so he can submit the bills parliament this month. He also needs opposition help to pass them since the Democrats lack a majority in the upper house, which can block legislation.

"What we are saying is that it has become just a tax hike and is 'social security and tax reform' in name only. There is no vision for social security reform," Ozawa said in the interview that was cleared for publication on Thursday.

"Therefore, there is basically no change to my stance that I cannot agree to it (the legislation) as it is," he said.

Whether all Ozawa's backers, who by some counts total about a third of the DPJ's lower house lawmakers, would join him in voting against a tax hike is unclear, but some analysts said if the legislation were voted down, Noda might well have to resign.

If Noda backs down, staying in office could also be tough, since he has staked his political career on fiscal reform.

(Reporting by Linda Sieg, Kiyoshi Takenaka and Yuko Yoshikawa; Editing by Tomasz Janowski and Edwina Gibbs)