Japan must quickly overhaul the tax system to prevent government borrowing costs from spiraling in the next decade, the new head of the nation's banking lobby said.
"The risk of a tumble in government bond prices would increase if taxation and social security reform are left unsolved for years," said Yasuhiro Sato, whose tenure as chairman of the Japanese Bankers Association began Sunday. "The country's financial assets are dwindling with the aging population dipping into savings."
Japanese banks hold a record amount of the nation's bonds, prompting central bank Gov. Masaaki Shirakawa to warn in February that lenders risk incurring trillions of yen in losses if yields rise. Prime Minister Yoshihiko Noda faces opposition to his plan to double the sales tax by 2015 to pay for swelling welfare costs and contain the world's biggest public debt.