Japanese Prime Minister Yoshihiko Noda will reshuffle the Cabinet Monday in an effort to win opposition backing for doubling the consumption tax, after his bid to heal a breach in the ruling party failed.

“I’ll map out the scale of Cabinet changes,” Noda told reporters in Tokyo yesterday. The prime minister may bow to opposition pressure to fire Transport Minister Takeshi Maeda and Defense Minister Naoki Tanaka, who were censured by parliament’s upper house in April.

The premier said he was unable yesterday, for the second time in a week, to persuade ruling party powerbroker Ichiro Ozawa to drop his opposition to a tax increase, hindering efforts to pay for rising welfare costs. Ozawa’s stance threatens to widen a rift in the Democratic Party of Japan three years after it ousted the Liberal Democratic Party from half a century of rule.

Noda has staked his career on reaching a deal with the opposition to double the 5 percent tax and address a debt burden that Fitch Ratings cited in cutting Japan’s sovereign credit rating. The prime minister declined to say what action he’ll take against party members who oppose the tax bill.

Ozawa, head of the DPJ’s largest faction and engineer of its August 2009 election victory, says a tax hike contradicts the party’s platform and could fail in its aim of increasing revenue if it prompts consumers to cut spending. Noda has said the combination of the world’s most-rapidly aging society and a declining birthrate has put Japan in an “unprecedented situation” that requires reining in welfare expenditures.

Ozawa’s influence in the DPJ has risen since he was acquitted last month of charges of campaign finance violations.

(Bloomberg)