Finance Minister Says Japan Government Must Ask Voters to Approve Tax Change

“We need to confirm the will of the people before making any significant changes to the tax system,” Kan told lawmakers in parliament in Tokyo today. He said discussions won’t be limited to “whether to raise or lower” certain levies.

Kan said yesterday the government will start debate on taxes next month, in contrast with remarks made last month, when he said the system will be overhauled only after exhausting cost-cutting measures. Moody’s Investors Service said raising the sales tax won’t be enough to repair the country’s finances without a strategy to spur growth and corporate earnings.

“Japan still hasn’t solved this problem where there’s a negative feedback loop,” Thomas Byrne, senior vice president at Moody’s in Singapore, said today on Bloomberg Television. “The big surge in tax collection that occurred before this global crisis came through corporate taxes, so it’s very important for corporates to remain profitable.”

Kan said on Fuji Television yesterday discussions will include income, corporate and environment taxes in addition to the sales levy. Prime Minister Yukio Hatoyama, whose Democratic Party of Japan took office in September, has pledged not to raise the sales tax for four years.