Japan PM eyes election if tax bills don't pass: report

TOKYO Mon Jan 2, 2012 11:37pm EST

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TOKYO (Reuters) - Japanese Prime Minister Yoshihiko Noda wants to call a snap general election if parliament does not approve bills needed for a sales tax increase, the Sankei newspaper reported Tuesday.

Japan is saddled with public debt twice the size of its $5 trillion economy and Noda wants to double the sales tax to 10 percent by October 2015 to help fund its ballooning social welfare programs.

The government plans to submit bills necessary for the tax increase to parliament by March, but passage is uncertain as combative opposition parties can use their control of the upper house to block legislation.

Noda, a fiscal hawk, told a former prime minister last month that he wanted to call a general election if the bills do not pass, the conservative Sankei newspaper reported, citing sources close to Noda.

An election for the powerful lower chamber must be held by late 2013.

After much wrangling, the ruling party's tax panel agreed last week to rise the 5 percent sales tax, among the lowest in developed economies, to 8 percent in April 2014 and then to 10 percent in October 2015.

But Noda faces resistance not only from the public and opposition parties but also from some members of parliament from his fractious Democratic Party, and nine junior lawmakers submitted requests last week to leave the party over the issue.

Noda's support rating had dwindled to 36 percent in a poll released by the Nikkei business daily last month, a 30 point drop since he took office in September. [ID:nL3E7NQ008]

In the survey, 53 percent said they disapproved of the sales tax increase.

Many politicians are wary of tax increases given the drubbing ruling parties have suffered in past elections when the levy was a focal point. A proposal to raise the sales tax contributed to election losses for the Democrats in 2010.

While Japan faces downgrading threats of its government debt by rating agencies, some economists say the situation is different from that of crisis-struck Europe because Japan can fund its debt domestically with its vast pool of household and corporate savings. [

(Reporting by Yoko Kubota; Editing by Robert Birsel)

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