Taxing times for Japan's premier
By Kosuke Takahashi
TOKYO - With the current financial crisis deepening and heads rolling in many
quarters of the globe, there is only one nation that is seriously discussing a
tax increase - Japan, the world's second-biggest economy.
While stressing at every occasion that "the world is on the verge of a
once-in-a-century recession", Japanese Prime Minister Taro Aso is also adhering
to his policy of raising the consumption tax rate in three years, by which time
he believes the nation's economy would have recovered.
The argument over the tax hike is eroding the already buffeted consumer
confidence of ordinary Japanese. Aso, meanwhile, has
pressed on with his 2 trillion yen (US$22.3 billion) cash benefit program for
all households to encourage spending. Many are confused, even inside his ruling
Liberal Democratic Party (LDP), as to whether he really wants to spur
consumption.
An additional supplementary budget worth 27 trillion yen, including the 2
trillion yen program, was finally passed into law in the current Diet
(parliament) session on Tuesday.
Having avoided a snap election despite declining approval ratings since he took
office last September, Aso is increasingly losing the centripetal force of his
administration and his ruling LDP.
On January 13, powerful lawmaker Yoshimi Watanabe, a former minister of
administrative reform, left the LDP in opposition to Aso's policies.
Watanabe aims to abolish the practice of Amakudari, or "golden
parachute", in which high-ranking government officials obtain executive posts
in private firms.
The incident underscores growing clashes within the LDP. There are also
disputes over such issues as civil service reform and legislative revisions to
enable a consumption tax hike in fiscal 2011.
"The Aso administration is over, so is the LDP," Chuichi Date, a LDP Upper
House member who currently serves as the party's deputy secretary general, said
in an interview with Asia Times Online on Monday. "It may be high time to hand
over the reins of government to the [main opposition] Democratic Party [of
Japan - DPJ]."
Yamagata shock
Two events over the weekend presented additional difficulties to Aso's control
of the government. First was Sunday's election in Yamagata prefecture, about
289 kilometers north of Tokyo.
The DPJ-backed newcomer Mieko Yoshimura, a 57-year-old housewife with no
political experience, defeated first-term incumbent governor, Hiroshi Saito,
51, a former Bank of Japan officer. Previously, Yamagata prefecture had been
known as a stronghold of the LDP.
Yoshimura, whose campaign motto was "Change Yamagata!", became Japan's sixth
female prefectural governor. Surprisingly, she only announced her candidacy
some 40 days before the election campaign started.
Moreover, it's extremely rare in Japan's rural areas to see a first-term
incumbent governor lose a second-term election. Many political observers
attribute Saito's loss to fiscal reforms such as budget cuts and reduced
subsidies to farmers.
Yoshimura's win dealt a blow to the struggling Aso and is expected to give the
DPJ a boost ahead of the next House of Representatives election, which must be
held by September. The vote presents a good chance of changing the ruling party
- a major power shift from Japan's 50-plus years of de facto one-party rule.
The other problem for Aso are the latest public opinion polls. The Mainichi and
the Nikkei newspapers, two of the nation's top dailies, on Monday reported
Aso's approval rating at 19%, down from 21% a month ago. This reflects public
dissatisfaction with Aso's failure to take cope with the ailing economy.
This is the first time the government's approval rating has fallen to less than
20% since February 2001, when the cabinet of prime minister Yoshiro Mori was in
its last days, according to the Nikkei newspaper.
A tax hike and a cash benefit program
Aso repeatedly reiterated his plan to raise the consumption tax rate from 5% in
the fiscal year 2011. "The nation's greatest interest is on social security
spending for pensions, elderly care and social welfare. Unless we stabilize
that area, society will not have security," he has been quoted as saying.
Government spokesman Takeo Kawamura said on Monday the Aso administration may
make the increase in consumption tax the focal point of the next election in
order to secure the future social welfare budget. A January 17 editorial in the
Asahi newspaper announced, "If Aso really intends to tackle this hot-button
issue head-on, we applaud his decision."
Discussing a tax hike amid a deepening recession is bad timing on the part of
Aso and the Asahi newspaper. In the Nikkei survey, 67% said they opposed a
consumption tax hike, while 24% cited their approval. On the government's $22.3
billion economic stimulus measure, 67% of respondents expressed disapproval,
while 22% endorsed it. People are facing up to the cash-strapped condition of
the public finances and don't want to see the government wasting money any
more.
"Indeed, Japanese voters appear increasingly to be reaching a consensus that a
change in leadership would be desirable," wrote Naomi Fink, strategist at the
Bank of Tokyo Mitsubishi UFJ, on Monday in a research paper titled "Is an
export-led recession finally fanning winds of political change?"
Fink continued: "[T]he Nikkei/TV Tokyo poll shows that 52% of voters now wish
to see a 'grand coalition' government. Though long neglected, capability to
pass credible legislation is crucial for Japan to stage a domestic-demand led
recovery."
Kosuke Takahashi, a former staff writer at the Asahi Shimbun, is a
freelance correspondent based in Tokyo. He can be contacted at letters@kosuke.net.
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