6 June 2006, 11:48  LDP must broach issue of tax rise

Finance Minister Sadakazu Tanigaki said Japan needs to broach the issue of raising taxes and criticised colleagues in the ruling party who want to postpone discussion of them, the Financial Times reported on Tuesday. Tanigaki, seen as a candidate to become Japan's next prime minister, has been a leading advocate of higher taxes as a way to cut the nation's mountain of public debt, which is around 150 percent of gross domestic product. "The most delicate political issue will be how to combine (next summer's upper house) election with discussions of the taxation system," Tanigaki told the newspaper in an interview. If the tax issue was deferred beyond the next summer, it would become much more difficult resolve the problem of Japan's fiscal conditions. "If the ruling party at the time of (every) election says we will never touch the tax issue and just tells the public that everything will be all right, lots of Japanese people will grow to doubt the government's authenticity or its seriousness about facing the future," Tanigaki was quoted as saying. The paper said he hinted that if he ran in the contest to replace Prime Minister Junichiro Koizumi, who steps down in September as head of the Liberal Democratic Party, he would raise broader policy issues, including creating a fairer society after five years of market-led reforms and improving relations with Asian neighbours. "I am not sure a tax hike can make a good one-point issue to help the ruling party win an election," he said. Оn the Bank of Japan's monetary policy, Tanigaki reiterated his concerns about its impact on public debt. "If the interest rate trend goes up over a long period of time, then because of the massive accumulated national debt, our situation will become very vulnerable." Speculation is rife in financial markets that the BOJ could start raising key short-term interest rates from zero percent in the coming months.

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