Japan signals tax reform, seeks to avoid deadlock

Overhaul of system to include consumption tax increase, PM says

TOKYO - Japan's government said on Tuesday it had to press on with tax reforms to cut a huge public debt despite a stunning election setback, and was looking to two opposition parties to help drive policy change.

Prime Minister Naoto Kan's ruling coalition lost its upper house majority in a weekend election, putting his policies to deal with debt and generate growth at risk and prompting warnings by credit rating agencies S&P and Fitch on Japan's sovereign ratings.