The fiscal year starting in April will not see the introduction of a contentious environment tax, thanks to strong opposition from the business community and ruling party lawmakers who hope to prevail in next July's Upper House election, government sources said Dec. 14.

The Democratic Party of Japan-led government will probably keep some provisional gasoline and other automobile-related taxes intact next year, backpedaling on a promise to abolish them, while meanwhile exploring the possibility of introducing an environment tax in fiscal 2011 or later, the sources said.

With the decision to shelve the environment tax, Prime Minister Yukio Hatoyama's Cabinet will probably find it harder to raise enough money to fund its key policy pledges amid a shortfall in tax revenue.

The complete abolition of gas- and auto-related taxes would lead to a shortfall of about ¥2.5 trillion in national and local tax receipts.