The ruling Democratic Party of Japan on Friday began talks with the largest opposition party over its plans to double the 5 percent consumption tax and envisioned social security reforms.
The Liberal Democratic Party is in agreement with Prime Minister Yoshihiko Noda's proposal to double the sales levy to 10 percent in October 2015, a member of its tax panel, Takeshi Noda, said Friday.
On social security, the LDP is demanding that the ruling party scrap its current welfare plans, including a bill that would guarantee a minimum basic pension, in return for its support over the tax hike.
"We agree with the government's plan to raise the sales tax in two stages, as there is a risk attached to a sudden 5 (point) increase," the LDP's Noda said. "But there is also the question of social security. None of us (in the LDP) can agree to move forward with the sales tax until the matter is resolved."
Dropping the social security legislation, some of which fulfills pledges made by the DPJ during its victorious campaign in the 2009 general election, would risk splitting the party. DPJ power broker Ichiro Ozawa has already declared his opposition to raising the consumption levy, a move that increases the risk of internal divisions.
The two parties said they have agreed to strike a deal by June 15.
However, "there is a possibility they won't come to an agreement," said Kazuhisa Kawakami, a professor of political science at Meiji Gakuin University in Tokyo.
"Prime Minister Noda is extremely determined to pass the bills, so he may swallow the LDP's proposals to achieve this. That will create a rift in the DPJ, but I think he may be prepared to risk it," Kawakami said.