Japan's Democrats offer polls in "near future" to save tax plan

Reuters News
Posted: Aug 08, 2012 12:11 AM
Japan's Democrats offer polls in "near future" to save tax plan

By Yuko Yoshikawa and Tetsushi Kajimoto

TOKYO (Reuters) - Japan's ruling Democrats on Wednesday offered to call an election in the "near future" to save their sales tax increase plan after the opposition demanded a commitment to early polls in return for backing the bill in an upper house vote.

The opposition has yet to formally respond to the pledge, but first reactions suggested it was too vague.

"(Noda) will go to the people in the near future when the bill is enacted," Fumio Kishida, parliamentary affairs chief for the opposition Liberal Democratic Party (LDP), quoted his Democrat counterpart as saying.

It is the first time the Democrats have made such a pledge, but Kishida told reporters it was not enough.

"We won't be satisfied with promise of 'near future'."

LDP number two Nobuteru Ishihara said nothing short of an immediate election would do.

Elections are not due until August 2013 and Prime Minister Yoshihiko Noda's Democrats have long resisted demands to bring them forward, with opinion polls showing they would lose badly.

The passage of the plan to double the sales tax by 2015 had appeared assured after the Democrats and two main opposition parties struck a deal in June and passed it in the lower house.

But several fringe parties filed censure and no-confidence motions against Noda and his cabinet on Tuesday and the LDP seized the opportunity to pile on more pressure.

It threatened to file its own censure and no-confidence motions against him and his government, which would effectively block the tax vote and deem the June deal void - unless the Democrats agreed to bring forward general elections.

Markets have long factored in the tax plan's safe passage and the renewed uncertainty put government bonds under pressure.

"The tax bill is expected to pass eventually, but with JGB yields already headed up, it's just another reason to sell," said a fixed-income fund manager at a Japanese asset management firm.

Noda has staked his political future on his plan to double the sales tax to 10 percent by 2015 in an effort to curb a snowballing public debt, splintering his party in the process.

The upper house vote was initially scheduled for Wednesday, but got pushed back following the no-confidence and censure motions.

The Democrats should still be able to defeat the motions unless 15 or more MPs vote with the opposition.

(Writing by Tomasz Janowski; Editing by Nick Macfie)