Japan PM renews call for tax debate with opposition

* PM Noda reiterates calls for inter-party debate on tax reform

* PM Noda: to work closely with BOJ to beat higher yen, deflation

* PM Noda: strives for diplomatic solution to Iran nuclear issue

TOKYO, Jan 24 (Reuters) - Japanese Prime Minister Yoshihiko Noda renewed his appeal to opposition parties on Tuesday to join talks on tax and social security reforms aimed at keeping in check swelling national borrowing, pointing at the European debt crisis to underscore the urgency of doing so.

Noda aims to submit bills to parliament by March to double the 5 percent sales tax in stages by 2015, and has been asking the opposition bloc to participate in preliminary talks on the legislation to secure passage in a divided legislature.

But the main opposition Liberal Democratic Party (LDP), which was ousted from power in 2009 after more than half a century of almost unbroken rule, says Noda should first call an election for the powerful lower house and seek a fresh mandate.

"The baby boomer generation is turning from supporters (of the social security system) into beneficiaries ... The current system, if unchanged, will put an unbearable burden on future generations. We don't have time left to postpone reforms," Noda told parliament.

"Once trust in a state is lost, it's too late. That is quite obvious if you take a look at the situation in European countries."

In a rare move to prompt the opposition to work with the ruling camp on the reform plan, Noda quoted former LDP Prime Minister Taro Aso in his policy speech as saying reforms are necessary to create a sustainable social welfare system.

"These are not my words. They are from the policy speech then-Prime Minister Aso gave three years ago in this chamber," Noda said.

"I do hope people will reach across party lines and join talks on the draft plan for the sake of the public and for the sake of the future of this country."

Noda took office in September as Japan's sixth premier in five years to spearahead Japan's largest reconstruction since the years following World War Two, bring under control a radiation crisis triggered by the March earthquake and tsunami, curb public debt that is twice the size of the economy and put vigour back into the economy.

"In order to overcome the yen's rise to historical levels and prolonged deflation we will fortify cooperation with the Bank of Japan ... and manage solid economic and fiscal policies," Noda said.

DIPLOMATIC SOLUTION ON IRAN

On the foreign policy front, Noda needs to deal with a rising China, an unpredictable North Korea that is undergoing a power transition, and U.S. sanctions against Iran.

Washington wants Asia to cut crude oil imports from Iran in a bid to pressure Tehran to rein in its nuclear ambitions, which it suspects are aimed at making weapons. The United States says it will punish financial institutions that deal with Iran's central bank, the main clearing house for oil payments.

Japan pledged last week to keep cutting purchases of Iranian crude.

Noda said Japan shares serious concerns with the international community on the issue, but did not elaborate how soon or by how much its imports of Iranian oil will be reduced.

"In principle, we will strive to reach a peaceful and diplomatic solution. We'll address the problem appropriately, while cooperating with other countries and taking into account the potential impact on the crude oil market and the Japanese economy."

Cutting crude oil supply from Iran would not be without risks for Japan as it relies on imports for its energy needs and has to import more fuel to make up for sharply reduced use of nuclear power following the Fukushima crisis.

Fukushima sparked public anxiety over nuclear safety, preventing the restart of reactors shut since then for checks, and only five of the nation's 54 reactors remain in operation, straining power supply.

On ties with China, with which Japan has a long-running territorial dispute, Noda expressed his willingness to work with Beijing to improve bilateral relations.

"Stability and prosperity in the Asia-Pacific cannot be discussed without China playing a constructive role," Noda said.

"Leaders from both countries have frequently reaffirmed the policy of deepening our strategic, mutually beneficial relations. Now it is time to enrich that further, and strengthen cooperation to create a stable regional order."