Japan PM, Ozawa still apart on tax, opposition deal beckons
TOKYO (Reuters) - Japanese Prime Minister Yoshihiko Noda edged closer on Wednesday to a possible deal with the opposition to push through his plan to double the sales tax, after party heavyweight Ichiro Ozawa refused to support his signature initiative.
Former finance minister Noda has pledged to bring the plan to vote in the current session of parliament that ends on June 21, and requires masterful maneuvering to get it passed.
The tax hike is seen as an essential part of efforts needed to curb Japan's snowballing public debt. Ratings agency Fitch cut the nation's credit rank last week, citing scant progress in coping with swelling social security costs.
Without the votes from Ozawa's group, the Democratic party's biggest faction, Noda needs opposition help to pass the bills both in the lower house which is controlled by the Democrats, and the upper house where the opposition has the majority.
The main opposition Liberal Democratic Party (LDP), which has long insisted only an early election could pave the way to an agreement on the tax plan, has cracked the door open to a compromise in the past few weeks.
A senior LDP lawmaker told Reuters last week the party could back a proposed hike in the tax to 10 percent by 2015 if Noda agreed to drop elements of the tax and social security reform that could lead to more spending.
Another senior lawmaker close to LDP leader Sadakazu Tanigaki told Reuters earlier this week that a clean break with Ozawa and a promise to call an early election after the passing of the tax law could secure Noda opposition backing.
"If Noda could say 'let me just do this (raise the tax) and if this could be achieved let's call an election' ... that would be a major step towards paving the way for our cooperation," said the official, who declined to be named because of the sensitivity of the matter.
Ozawa stuck to his line that other reforms should come before a tax rise that was not part of the party's platform that brought it to power in a 2009 landslide.
"Before making people shoulder a big tax burden the government has things to do and (tax hikes) should come after those things get done," Ozawa told reporters after meeting Noda.
"As sales tax hikes are big tax hikes worth about 13 trillion yen ($163.54 billion), if I am asked now whether to support this or not I cannot support it."
Noda, speaking to reporters later, acknowledged the two failed to bridge the gap, though the disagreement was about the timing rather than the merits of a tax rise.
Since a court cleared him last month in a political funding case, Ozawa has repeatedly called for Noda to drop the tax plan that many in his own party fear will damage them at the polls.
Noda, however, has repeatedly stated that he would rather sacrifice his political career and risk a rift in his party than give up the tax plan.
($1 = 79.4900 Japanese yen)
(Additional reporting by Kiyoshi Takenaka and Kaori Kaneko; Editing by Tomasz Janowski and Daniel Magnowski)
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