TOKYO: Japan's cabinet on Friday approved a bill to double the nation's sales tax to 10 percent, overcoming an earlier scare after the head of a coalition partner said it could leave the government over the issue.
The agreement is a step closer to a deal the government says will help rein in the nation's gigantic public debts, but it is still likely to face a rocky road.
A group of lawmakers from the ruling Democratic Party of Japan (DPJ) is threatening to vote against it, due mainly to worries that a tax increase would derail Japan's uncertain economic recovery.
The DPJ's former head and major political power broker Ichiro Ozawa, who leads the party's anti-tax group, told local media on Thursday that he "can't support a simple tax hike."
"If (Prime Minister Yoshihiko) Noda pushes for a publicly unpopular tax hike, his party support base will disappear," Ozawa was quoted as saying.
The opposition, which controls Japan's upper house of parliament, is also unhappy with the bill and could scupper its passage.
The law would see a sales tax rise from five percent to 10 percent by 2015.
Ahead of the crucial vote late Thursday, Shizuka Kamei, the head of the People's New Party, said his faction was divided on the issue and could leave Noda's fragile coalition.
However, his deputy Shozaburo Jimi, who is minister of postal reform and financial affairs, eventually agreed to approve the bill Friday.
Japan's premier has warned the future of the world's third-largest economy rests on shrinking its massive public debt, saying there was "no time to spare" in cutting its fiscal burden.
"I will make utmost effort so that the bill be enacted after discussion between ruling and opposition parties," Noda told a lower house budget committee Friday.
The expected rise in government revenue is earmarked to cover Japan's snowballing social welfare costs, including public pensions and a universal health insurance system in a country that boasts one of the world's highest life expectancy rates.
Only about 40.0 percent of what the government currently spends comes from taxes.
The rest is financed by borrowing, leaving Japan's debt at more than double gross domestic product, dwarfing troubled Greece, with analysts warning that only higher tax revenue or spending cuts can solve the problems.
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