By Tetsushi Kajimoto and Tomasz Janowski
TOKYO (Reuters) - Japan's Prime Minister Yoshihiko Noda looks certain to win parliament's approval for his signature tax hike plan on Tuesday but risks deepening a rift in his party that, in an extreme case, could cost him his majority and lead to an early election.
The plan to double the sales tax to 10 percent over three years is seen as a first step towards curbing Japan's snowballing public debt, which already exceeds two years' worth of its economic output, a record for an industrialised nation.
A compromise struck with the opposition in mid-June allowed Noda to break months of policy gridlock and effectively secured the plan's passage in parliament, even if dozens of dissenters in his own party refused to back it.
However, if enough Democrat lawmakers snubbed Noda and left the party, he would no longer have a majority to pass other bills and would have little choice but to call an early election well before the parliament's term ends in the summer of 2013.
Opinion polls suggest the Democrats would suffer heavy losses in a snap election, but the rival Liberal Democratic Party would also be well short of a majority and an inconclusive outcome could spell more uncertainty and political paralysis.
Japanese media say about 60 lawmakers allied with former party leader Ichiro Ozawa, 70, could break ranks in the tax vote. The Democrats would lose their majority in the 480-member lower house if 54 or more MPs left the party.
But not all of the dissenters are prepared to leave the party, and analysts and media speculate the Democrat leadership is more likely to let the rebels get away with a slap on the wrist rather than expel them to stop the party from breaking up.
"The Democratic Party of Japan has never expelled its members for voting against its legislation, and the party is likely to stick to that stance," said Nihon University political science professor Tomoaki Iwai. "Many of lawmakers poised to vote against the bill have no intention to defect either."
As a result, the Democrats could remain locked in internal struggles at least until the vote on the sales tax in the parliament's upper house, with Noda forced to continue to rely on the opposition.
Noda, the former finance minister, has repeatedly said he was prepared to put his job and his party's grip on power on the line to muscle through the tax bill, which he has made the main goal of his 10-month premiership.
To achieve that he needed cooperation from the opposition, which controls the parliament's upper house. The breakthrough came after the Democrats agreed to row back on some social security spending pledges they made during their victorious 2009 election campaign.
But that made many within the party feel it went too far in dismantling its platform and essentially adopting policies of the Liberal Democratic Party they ousted.
In a recent interview with Reuters, Noda acknowledged that the Democrats had failed to keep some of their promises, but that was in part because as an opposition party they had not fully understood the gravity of the budget situation.
(Additional reporting by Kaori Kaneko; Editing by Paul Tait)
