Japan's government and the ruling party on Thursday agreed a plan to double sales tax by the middle of the decade, as the nation looks to tackle rising social welfare costs and ballooning debt.

However, the timing of the plan was watered down from an earlier proposal to double the tax — currently 5 percent — by March 2016, with no fixed date set.

Some lawmakers fear that the economy is too fragile to cope with a tax hike, despite the threat from ratings agencies of a sovereign debt downgrade.

Final approval of the plan is expected to be complicated by the fact that Prime Minister Naoto Kan is expected to resign in coming months amid opposition pressure.

Kan has faced mounting criticism for his response to the country's March 11 earthquake and tsunami disaster amid anger at his handling of the ensuing nuclear crisis and slow progress in helping victims.

The finalized tax and social security overhaul plan proposed to double the five percent consumption tax in stages "by the middle of the 2010s," Democratic Party of Japan (DPJ) policy chief Koichiro Gemba told reporters.

The vague wording made it less clear how committed the government is to lifting the tax to 10 percent in the years ahead.

Expanding welfare costs have squeezed government finances in Japan, where the population is rapidly ageing while the workforce shrinks.

As tax revenues fall, Japan has seen its public debt expand to around 200 percent of GDP, the highest in the industrialised world.

Kan had made social security reform his priority amid battles with a political opposition intent on blocking government action to push him to call a general election.

When Kan brought the idea before voters in elections last year, his Democratic Party of Japan suffered a huge defeat and lost control of the upper house, effectively freezing legislative debate on the subject.

The earthquake and tsunami and the task of rebuilding devastated areas has forced Kan to review earlier policy priorities, amid concerns the cost of rebuilding would also pressure Japan's debt.

The International Monetary Fund in June suggested a consumption tax hike to about seven or eight percent from next year, and ultimately to about 15 percent in a decade.

— Dow Jones Newswires contributed to this story —