Japan Finance Minister vows fiscal reform, sales tax eyed

TOKYO: Japanese Finance Minister Jun Azumi pledged on Tuesday to tackle fiscal reform to prevent a European-style sovereign debt crisis, with the government aiming to double the 5 percent sales tax by 2015 to fix tattered public finances and fund social security.

With public debt about twice the size of Japan's $5 trillion economy, the worst among industrial nations, Azumi said in prepared remarks before an opening session of parliament that the government must not turn its back on fiscal reform.

He also said he will work closely with the Bank of Japan to beat deflation and shore up the economy, which he said is picking up slowly but facing risks from Europe's debt crisis, currencies, and power supply problems stemming from the nuclear crisis triggered by last year's earthquake and tsunami.

"When looking at sovereign debt problems in Europe, it is obvious that if finances were left in their present state it could pose a big risk to efforts to achieve stable economic growth," Azumi said.

"We need to tackle fiscal reform as soon as possible and lay a foundation for stable economic growth through an integrated reform of tax and social security."

The government plans to double the 5 percent sales tax in two stages by 2015, and is urging opposition parties to join talks on the proposal. But the main opposition Liberal Democratic Party is seeking an early election instead.

Azumi said the government will submit bills related to the sales tax to parliament by the end of the current fiscal year on March 31.

With the government planning to issue debt totalling a record 174.2 trillion yen ($2.26 trillion) next fiscal year, Azumi said he would strive to secure market trust in fiscal discipline.

"I will steer debt management appropriately while carrying out issuance based on market needs and trends through close dialogue with the market."

The government, which will rely on public debt to fund nearly half of the 2012/13 draft budget to be sent to parliament for approval, plans to spend a record 96 trillion yen including reconstruction and pension costs, caving in to lawmakers' demands on spending.