— But Japan Upper House Must Still Vote On Tax Hike Bills

TOKYO (MNI) – The lower house of the Japanese parliament on Tuesday
approved by majority vote Tuesday legislation that would double the
current 5% sales tax by 2015 and improve social security services,
despite a revolt from within the ruling Democratic Party of Japan.

‘Yes’ votes for the bills came from 363 lawmakers in the House of
Representatives, including those from the main opposition Liberal
Democratic Party and the New Komeito, while 96 voted against the bills,
House Speaker Takahiro Yokomichi said.

The tax hike bills still need to receive approval from the House of
Councillors (upper house) before becoming law.

Some 57 politicians in the ruling Democratic Party of Japan,
including former party leader Ichiro Ozawa and former Prime Minister
Yukio Hatoyama, voted against the bills or abstained, arguing that the
DPJ didn’t call for a tax hike in its August 2009 general election
platform, according to a report in NHK.

Ozawa and his allies have threatened to break away from the DPJ and
form another political party but it is not yet known how many of them
would actually leave the ruling party after Tuesday’s vote.

The DPJ took power away from the LDP in 2009 by promising to boost
Japan’s fiscal health through slashing ‘wasteful’ government spending
and reallocating tax money for projects that would support families with
children and reduce unemployment.

But the DPJ government soon hit a policy wall, realizing that there
was only so much it could do to trim spending in order to generate funds
for necessary public programs.

About a year ago, then Prime Minister Naoto Kan abruptly proposed a
sales tax hike as a way of enhancing public pension and medical
services, which he said would ease fears about the future among the
younger generation and thus help revive economic vitality.

Prime Minister Yoshihiko Noda, who took over from Kan last
September, has repeatedly said he is staking his political life on
raising the consumption (sales) tax in order to fund growing social
security costs of the rapidly aging population and to reduce the huge
public sector debt, at nearly 200% of GDP by far the largest among
developed countries.

Noda has extended the 150-day ordinary Diet session by 79 days
until Sept. 8 so that the opposition controlled upper house will have
enough time to debate and vote on the bills.

Earlier this month, the ruling coalition reached an agreement with
the two main opposition parties — the LDP and Komeito — to hike the
current 5% consumption tax rate to 8% in April 2014 and to 10% in
October 2015 on condition that the economy is growing at a real 2% at
the time.

tokyo@marketnews.com
** MNI Tokyo Newsroom: 81-3-5403-4833 **

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