Monday, March 17, 2008

How the LDP Should Respond to the Sankei April Panic Story

If this story had appeared in the Yomiuri, I would have been sure that it was an LDP plant. However, since a Sankei reporter wrote it, with a byline, I think that the LDP should take it seriously. I’m sure that the people there would’ve worked it out already, but just in case they haven’t, this is the message that I would advise them to send out. That is, I would if I were a well-paid LDP advisor. But I’m not an LDP advisor, let alone paid. So I won’t. Instead, I’ll post it here, in English, for your amusement:

“Dear people of Japan, ever welcome residents, and other members of the global community:

“It became clear that the DPJ’s opposition towards the appointment of Toshirō Mutō was driven purely by political motives and had nothing to do with his personal qualifications. In fact, its leaders have admitted as much on public television. We believed then and believe now that Diet members should not play politics with a matter that, handed improperly, could have sent the market into needless turmoil, and during substantial uncertainties in the financial and currency markets at that. Happily, we avoided a crisis by nominating another candidate with similarly excellent credentials and experience.

“We had hoped that the experience would drive home to the DPJ leadership the gravity of the possible consequences of its actions and thenceforth they would refrain from playing politics with other matters of import. Alas, it was not meant to be.

“A news report has brought to your attention the allegation that the legislation that the DPJ had introduced in the Upper House on special tax measures including the gasoline taxes and related matters had been design to trap the LDP-New Kōmeitō coalition into accepting the DPJ plan wholesale or risk massive capital flight in addition to the immediate fiscal difficulties that a prolonged gap in the gasoline tax collection would cause. We had inklings of this, but did not at first believe it. For if true, this meant that the DPJ had never intended to negotiate in good faith in the first place and that they had merely been casting about to find excuses to flout the consent decree by the two House Chairmen that we had accepted and agreed to forego our own stopgap legislation in the event. Thus, we continued to pursue meaningful dialogue and tried not to believe that the DPJ’s time-killing tactics during the deliberations in each of the Two Houses were nothing more than transient moves to position itself in the best situation as the 31 March deadline would approach. We gave every indication that we were willing to discuss and if necessary alter any element of our program in an agreement with the opposition. However, the news report, in conjunction with the fact that its leadership has not made any move to deny its import, has led us to the conclusion that the DPJ has, indeed, decided to endanger the health of the Japanese economy for pure political profit.

“We are both happy, and sad, to report to you, the people of Japan, etc., etc., that the DPJ efforts are in vain, that we will pass our legislative bill, wait for a suitable period, then go ahead with members of the opposition who actually want to seek an optimal solution to the issues surrounding the gasoline tax revenues and our road construction plan. And we will do this with little economic hardship or confusion, unlike the DPJ plan of an immediate cutoff. Let us explain.

“The DPJ apparently believes that a one- or two-month cutoff of the tax relief for offshore depositors will cause massive capital flight. To play such a dangerous game for political gain is almost beyond our imagination, but it’s apparently real. However, 15% of say 0.1% annually - for such are the low interest rates that banks pay on yen deposits - prorated for one or two months is not a substantial amount, in particular compared to the effects of currency rate fluctuations that the market records month by month, week by week, day by day, hour by hour, minute by minute. No wonder that the DPJ ploy has not worked and we have not seen the market jitters in anticipation of a catastrophe that it had hoped for. Moreover, the tax collected at the source will be refunded to the offshore account holders. In other words, there will be no financial loss whatsoever to the offshore account holders who have held steadfast in the face of DPJ’s political blackmail.

“The same holds true for all the other tax measures slated to expire that are favorable to the taxpayer. In other words, all special tax measures beneficial to the taxpayer that are resumed when we pass our tax bills in another month are retroactive as currently drafted. There will be some unwanted paperwork to recover your money. Forgive us, and bear with us, for it is not our intent to inconvenience you.

“On the other hand, the gasoline tax surcharge, when reinstated, will not be retroactive. For any tax benefit that has accrued to the taxpayer will be permanent. Tax agents will not come after you for the money. The corresponding revenue is lost forever to government coffers. This is not evident from the letter of the law as will be amended by our bill. However, a recent court decision made it clear that an amendment cannot be applied retroactively to the disadvantage of the taxpayer. We are of course following this case law here and in all other future tax cases. We have cleared this interpretation with the Cabinet Legislative Bureau and instructed the tax authorities to issue an appropriate public notice. But you saw/heard it here first.

“We are going ahead full steam. But we have every intention of following both the letter and the spirit of the consent decree. We are open to hammering out what now can only be a temporary stopgap solution. Still, we are willing to go ahead, with or without such an agreement, with any member of the opposition, including the DPJ, in its entirety or part, to seek a more permanent solution to our conundrum.

“Finally, we admit that we have been effectively chastised by the revelations with regard to some of the uses to which the hard-earned monies of yours, the Japanese public, etc., etc., have been put. We are also mindful of the allegations of waste and inefficiencies that have accumulated over the decades. We will go forward, with the cooperation of the members of the opposition that have your true interest in mind, to reform the system. We hope that the DPJ in its entirety will join us in this endeavor. However, recent events have filled us with suspicions that this will not be the case. So we feel compelled to make this public appeal.

“To repeat, nobody will lose a yen over this. But we are sorry that we may, if the opposition continues to flout the letter and spirit of the Chairmen’s Decree, inconvenience you somewhat.”

Yes, I just remembered that “if I were…” faux speeches, statements and letters like this are inherently silly. But do I care, me? No. So sue me, me.

Now I could be wrong. But I think that the reasoning, including the legal aspects, is sound. I’m not sure how much effect a statement such as mine will have; the Japanese public is very critical of the road construction expenditures. But the argument in the
Sankei report does not appear to hold water.

Yes, I just remembered that “if I were…” faux speeches, statements and letters like this one are inherently silly. But do I care, Me? No. So sue me, Me.

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