Japanese lawmakers approve sales tax increase amid political turmoil

CNN explains Japan's consumption tax hike
CNN explains Japan's consumption tax hike


    CNN explains Japan's consumption tax hike


CNN explains Japan's consumption tax hike 02:51

Story highlights

  • Fifty-seven members of the governing party vote against the increase
  • Many of them have threatened to leave the party over the issue
  • That could cost Prime Minister Noda his majority and result in a confidence vote
  • Japan has had six different prime ministers in the past six years

Japanese lawmakers approved a contentious plan to double the country's sales tax Tuesday even as Prime Minister Yoshihiko Noda battled to contain an uprising in his own party over the issue that could bring about his downfall.

The sales tax increase, aimed at reining in Japan's huge public debt, has been the defining policy initiative of Noda's premiership since he took office in September, becoming the latest in a string of politically fragile Japanese leaders.

He is the sixth prime minister to hold office in the six years since the departure of Junichiro Koizumi, who was in power for more than five years.

The lower house of the Japanese parliament passed the sales tax increase by 363 votes to 96, part of a series of social security and tax reform bills being voted on Tuesday. The measures will now be sent to the upper house.

Noda had heavily amended the proposed legislation to secure support from the biggest opposition party, the Liberal Democratic Party.

But 57 members of Noda's own party, the Democratic Party of Japan, voted against the sales tax increase, according to the office of the lower house of parliament. They are led by the influential Ichiro Ozawa, who is known for his political power-broking.

Ozawa and his supporters have threatened to quit the party over the issue.

"I expect a general election might be called in the near future," Ozawa said at a news conference Tuesday. "We should not waste the time. We will make a final effort and should make a decision what action we take in the near future."

If more than 54 members decide to leave the DPJ, the party will lose its majority in the lower house, raising the prospect of a vote of no confidence against Noda. If he loses that vote, he will have to either step down or call a snap election.

The proposed increase in the sales, from 5% at the moment to 10% by October 2015, is considered crucial by many analysts to help tackle Japan's enormous public debt of 709 trillion yen ($8.89 trillion).

That amounts to 219% of annual gross domestic product, the highest ratio in the developed world. Japan is grappling with ballooning social security and health care costs for its rapidly aging population.

Meanwhile, its economy is struggling to grow as the persistently strong yen hurts exports.