Kan Vows to Outline Stance on Japan Sales Tax by Mid-2011 Following Delay

Japan’s Prime Minister Naoto Kan vowed to outline his plan for the country’s sales tax by the middle of the year after delaying a promised debate on raising the levy as his ruling party’s popularity slumped.

“I’d like to deepen the nationwide discussion on which programs are most suitable for the country,” Kan said in a New Year’s statement distributed to reporters. “I intend to unveil sweeping reforms including those of the consumption tax and the social security system by the middle of this year.”

Kan had vowed to start a discussion on raising the 5 percent consumption tax ahead of his June campaign to become prime minister. Since then his popularity has fallen by more than half from a high of more than 60 percent when he took office and his Democratic Party of Japan lost 10 seats in upper house elections in July.

Kan also said he wants to promote free-trade talks with the European Union, South Korea and Australia as well as nations involved with the Trans-Pacific Partnership, or U.S.-led free- trade talks for the Asia-Pacific region. Trade agreements are needed so that Japan’s economy can benefit from growth in emerging countries, he said.

Kan’s cabinet had an approval rating of 23.6 percent in a Kyodo News survey published Dec. 26, unchanged from November. The nationwide telephone survey didn’t provide an error margin or say how many people were contacted.

Kan plans to cap new bond sales at 44.3 trillion yen ($544 billion) in fiscal 2011 to finance a record 92.4 trillion yen budget for the year starting April 1. He has pledged to keep bond sales unchanged for three years.

At one point last year Kan suggested he would consider doubling the sales tax to tackle the world’s largest public debt and save the failing social security system. Kan’s budget plan, which was disclosed Dec. 24, had a disapproval rating of 76 percent in a separate Kyodo News survey published Dec. 26.

To contact the reporters on this story: Sachiko Sakamaki in Tokyo at Ssakamaki1@bloomberg.net; Takashi Hirokawa in Tokyo at thirokawa@bloomberg.net

To contact the editor responsible for this story: Bill Austin at billaustin@bloomberg.net

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