Japan PM says to mull sales tax reform

TOKYO, Sept 1 (Reuters) - Japanese Prime Minister Naoto Kan said in a policy statement on Wednesday he would consider drastic tax reforms including the sales tax, along with holding a debate on how to fund the country's social welfare system.

"I will tackle fiscal consolidation without running away (from the problem)," Kan said in the statement as he began his campaign for the ruling Democratic Party's leadership vote.

Kan is set to battle powerbroker Ichiro Ozawa in the Sept. 14 party election, threatening a policy vacuum as Japan struggles with a rising yen and fragile economic recovery.

The winner of the race will likely become premier by virtue of the Democrats' majority in parliament's powerful lower house.

(Reporting by Yoko Nishikawa; Editing by Michael Watson)