* 10 pct hikes eyed for income, corporate taxes -paper
* Govt mulls doubling sales tax to cover welfare costs
* Lawmakers oppose tax hikes, urge BOJ to boost bond buying
(Adds nonpartisan lawmakers, details)
By Tetsushi Kajimoto and Chisa Fujioka
TOKYO, June 16 Japan's ruling party aims to
raise corporate and income taxes to repay new government bonds
for funding massive reconstruction needed after the March 11
earthquake and tsunami, a newspaper reported on Thursday.
The ruling Democratic Party (DPJ) is considering raising
both taxes by around 10 percent, generating 1-2 trillion yen
($12-24 billion) in annual revenue to pay back borrowing for
reconstruction over a decade, the Mainichi newspaper reported
without citing a source.
The party will not use revenue from the sales tax to cover
the reconstruction bonds, the paper said, as it wants to use
that tax for growing social security costs and is already
considering doubling it to 10 percent.
The government is trying to set the direction for Japan's
biggest rebuilding effort since the post World War Two period,
estimated to cost over $300 billion, after the March disaster
devastated the nation's northeast coast.
Many lawmakers are wary of tax hikes, however, worrying they
could alienate voters. Mounting calls for unpopular Prime
Minister Naoto Kan to step down also make it unclear if the
DPJ-led government could push tax hikes through parliament.
A nonpartisan group of 211 lawmakers said on Thursday they
oppose tax hikes for reconstruction. Instead they urged the Bank
of Japan to buy "reconstruction bonds" by boosting outright
purchases of long-term government bonds from the market beyond
the current 21.6 trillion yen ($267 billion).
"In principle we are against all kinds of tax hikes in the
name of reconstruction. We can carry out reconstruction without
resorting to a tax hike," DPJ lawmaker Takeshi Miyazaki told
The BOJ has been resisting calls for it to boost purchases
of government bonds out of concerns that such a move, if
perceived by financial markets as monetising debt, could cause a
spike in bond yields.
Some ruling party lawmakers had earlier this year sought to
have BOJ directly underwrite government debt by buying
reconstruction bonds, but the idea was quickly dismissed by
Kan ordered cabinet ministers this week to compile an
additional budget to help pay for reconstruction, to be
submitted to parliament next month. The legislature approved a
first emergency budget in May involving 4 trillion yen in
Finance Minister Yoshihiko Noda has said the government will
avoid issuing extra bonds to finance a second extra budget.
But further spending will likely require bond issuance at a
time when investors are nervous about Japan's huge debt, already
twice the size of the $5 trillion economy, the worst among
The ruling party is looking for spending of around 2
trillion yen in the second extra budget for rebuilding, media
said on Wednesday.
($1 = 81.035 Japanese Yen)
(Editing by Michael Watson)