Japan Kan calls talks about trigger tax

Tokyo - Japanese Prime Minister Naoto Kan said he will with talks to begin the country's opposition parties to increase the tax on the consumption of the nation, a divisive problem already to undermine the Government threatens low approval rating.

4, 2011 In Tokyo, Japan speaks during a press conference at his official residence on January Zuma press Japanese Prime Minister Naoto Kan.

Mr. kan's willingness, to deal with the thorny issue is a reflection of the toll that heavy debt issue took Japan's fiscal health in recent years. History teaches us that the Government scratch the approval rating already close to the 20% level, through an offer, the 5% consumption or sale, helped the tax increase will not.

"It everyone have - to discuss a tax overhaul including tax on consumption - from the perspective of the social security system and the necessary resources is clear, necessary," Mr Kan said in his speech on Tuesday. "I would like to nonpartisan consultations between ruling and opposition parties at the earliest on financing social security and open and approximately in June, I would like to offer a direction."

The Prime Minister offer no olive branch to the opposition in his speech. With a massive revenue gap in more than 50% of annual public expenditure and the need, the retirement and health right programs increase many government officials say there is little choice but to raise taxes.

Social security expenditure to an estimated a record 28.708 trillion yen (US$ 351 billion) reached in a recently unveiled national budget for the next fiscal year, the beginning of April, accounting for almost one-third of the total budget. The amount is 5.3% greater than the current fiscal year.

Japan's Government can borrow, social security programs to finance, but with its debt now almost twice annual economic output of the nation, pressure on the Government increase the tax on consumption, Assembly which say officials, tends to bring economic downturn relatively stable revenue during the.

It is unclear whether Mr Kan makes long enough to stick to see his plans by. The opposition to overthrow sensing a chance of the Government is increasingly uncooperative, grown, particularly regional elections in the spring faces.

After Mr. of kan's press conference demanded Sadakazu Tanigaki, leader of the largest opposition group, the Liberal Democratic Party, that first his own tax plan, demonstrate the Government of the Nikkei reported. The social democratic party signals, it will oppose increases in VAT, while new Komeito specified it can join tax nonpartisan discussions.

Mr. Kan could last summer rally support for higher taxes. Soon after he became Prime Minister June he unexpectedly suggested that the current 5% be raised tax on consumption in live on 10% and called for discussions on the matter.

But opposition lawmakers and even some ruling party politicians opposed to the idea. Legislator enthusiasm towards tax increases also waned after the ruling Democratic Party a crushing defeat in July's upper house elections, sustained was many analysts say by Mr. of kan's tax plan caused.

Increase in the consumption tax was never easy for Japan's policy makers. In 1989 saw Prime Minister Noboru Takeshita of his public approval rating sink, if his LDP Government introduced the tax at a rate of 3%. In 1998, the ruling party lost a upper House election after Ryutaro Hashimoto LDP-led coalition Government increased the rate to 5%.

Write toTakashi Nakamichi at takashi.nakamichi@dowjones.com

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