The Prime Minister, Yoshihiko Noda, faces a split in his party that could force a snap election after his tax-increase plan cleared parliament's lower house yesterday despite a rebellion among his MPs.
The plan to double sales tax to 10 per cent 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 allowed Mr Noda to break months of policy gridlock and secure the plan's comfortable passage through the lower house.
But 57 MPs from the ruling Democratic Party of Japan voted against the bill. If 54 or more of them left the party as a result, the Democrats would lose their majority in the more powerful lower house, raising the prospect of an election well before the next one is due by mid-2013.
Critics, led by the former Democrat leader Ichiro Ozawa, 70, credited for masterminding the party's 2009 election triumph, argue the tax increase is a departure from a party platform that promised to curb the powerful bureaucracy and cut wasteful spending before raising taxes.