Sunday, December 03, 2006

Little Nakagawa Says LDP Doesn't Like What His Soulmate Wants to Do with the Road Money. So What Will the Prime Minister Do about It?

In a news item so small I can reproduce it in English in its entirety with ease, tucked away in the corner of page 4, the Sunday morning Yomiuri tells us:

"Chairman of the Policy Research Council Nakagawa Is Negative Towards Putting Road-Specific Tax Revenue into the General Budget"

Chairman of the LDP Policy Research Council Nakagawa gave a speech on Dec. 2 in the city of Iwaki, Fukushima Prefecture, and, setting forth a different opinion, stated that, concerning the redirection of road-specific tax revenue, including the volatile oils (think gasoline) tax, into the General Budget, as Prime Minister Abe demands, "The [Liberal Democratic] Party have more or less come to a meeting of minds on a different view. The party's unified view is that we are going to provide truly necessary roads."

And all Mr. Abe wants for FY 2007 is \150,000,000,000 (a lot of zeros, but remember, they're 115 to the dollar) out of \3,542,900,000,000 (for FY 2006), or roughly 3% of the total. Leaving aside for the time being the question of how the LDP can come to a conclusion without a go-ahead from its commander-in-chief, this augurs ill for Mr. Abe's long-term strategy:

When Junichiro Koizumi came into power, he took aim at two forces that had been the backbone of LDP campaigning and finances, the national postal system, and the construction industry. He managed to pro forma privatize the National Post Office as well as the four road-construction-and-maintenance Japangos (Japanese quangos; yes, I made that up), striking a double blow against the political and administrative status quo.

But the task remains, at best in the case of the four road agencies, incomplete. The former continues to dominate the front pages on a slow day with the "Penance of the Twelve" Passion Play divertissement, but the second also lingers because the funds are still there for the taking. And we are finally paying off the last of the multi-trillion Yen debt that we incurred to build those four bridges to nowhere (actually, Shikoku is a beautiful place, with great food, great people, but one at most was widely considered economically feasible at the time) will be retired, leaving us in 2007 with a roughly \510 billion annual surplus.

Needless to say, the construction companies and the automotive industry and their LDP allies, as well as the local governments, are up in arms against any move to divert this surplus to the general budget. The automobile industry could go along with a tax cut, but that in turn would put a crimp in Mr. Abe's hopes to trim the national deficit while delaying as long as possible talk of a consumption tax increase. And this time, Komeito help in restraining the LDP opposition is doubtful, since they too are demanding that the money be used for roads and their environs.

Surely, Mr. Nakagawa S., good friend and ideological kinsman of the prime minister, will come up with a nice compromise. But it is likely that it will be cosmetic, with the money in the General Budget, but not quite general in its use. And Mr. Abe appears to be reluctant to invest much political capital in this intra-LDP tug-of-war.

If Mr. Abe continues to husband his resources with the instinctive caution that he brings to these occasions, it will erode his political leadership, as well as his ability to begin to set aright the national finances, a monumental task that Mr. Koizumi purposely left to his successors.

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