Saturday, March 01, 2008

Mainstream Dailies Line Up behind Gasoline Tax-Road Construction Compromise

Yesterday, on the very last day of February, the LDP-New Kōmeitō coalition pushed the budget and budget-related bills through the Lower House. This ensures that the budget at least will be enacted by default before the beginning of the next fiscal year on April 1 (see Article 60, paragraph 2, Japanese Constitution). All the opposition parties (even the People’s New Party) except the Communist Party absented themselves from the plenary vote in protest. Meanwhile, in the Upper House the same day, the DPJ submitted its own tax and road bills that essentially affirmed its post-manifest three-point position: 1) abolish the gasoline tax surcharge; 2) turn the remaining gasoline tax revenue over to the genera budget; and 3) eliminate local government co-payments from public works projects under the direct control of the central government. The coalition had in recent weeks been increasingly telegraphing its willingness to compromise, but the DPJ, likely emboldened by a weakened Fukuda administration, appears to have quieted internal dissent for the time being against its our-way-or-no-highway approach.

This sets up a showdown there on the gasoline taxes as the April 1 deadline approaches. The Lower House will not be completely in the background, though, as DPJ leaders are indicating that it may use the bicameral consent required to appoint the BOJ Governor - current Governor Toshihiko Fukui’s term expires on March 20 - as a counter in the high-stakes political game.

The outcome? Compromise is all but certain, though the outline is yet to emerge, given the DPJ’s hardball tactics, as well as the fact that the length of the extension (10 years in the government bill), the surcharge rate and the turnover to the general budget are all in play. The two sides must also figure out what to do with the 10-year, 59 trillion yen road construction plan. Still, a look at the media’s response leaves no room to doubt that a compromise will be reached.

In the blame game, the media are following their political instincts with more than the usual faithfulness. Asahi on the left puts the entire blame on the coalition, somewhat implausibly claiming that there should have been a way towards a compromise in the Lower House and even sympathizing with the opposition tactics on the BOJ appointment. The right-center Yomiuri comes down harder on the opposition over its stonewalling tactics in the Lower House. The left-center Mainichi calls down a cow pox on both parties and seeks the turnover of the gasoline tax revenues to the general budget while maintaining the surcharge.* However, all three are united in urging compromise.

Now every move under the DPJ’s tactics, as distinct from the substance of its proposal, has been focused on weakening the coalition government and forcing a snap election. To this end, they will feel the need for the support of significant portions of the mainstream media. So the consent decree set down by the two Presidents of the Upper and Lower House will stand; a compromise there will be, in time for the new fiscal year.

This will actually be a good thing politically for the DPJ. It has ceased to highlight lowering gasoline prices as the selling point for its position and is now hammering the coalition on the bloated road construction plan. This resonates with a public that has consistently agreed (a two-thirds majority in the opinion polls) with the DPJ that the road construction plans are highly wasteful. However, even if it manages to maintain its stonewalling tactics to the bitter end (doable; but no sure thing, given the internal dissent that will resurface as the deadline approaches), it will still be faced with the need to pick up the pieces after April 1. The DPJ package is not achievable in its entirety, if only for its revenue implications on the government finances as a whole. The DPJ would wind up with more or less what it would have achieved in the first place, but will be blamed for the momentary chaos that will have transpired in the meantime.

* Sankei on the right has not come out with an editorial on this issue today, preferring to go with the Chinese poisoned dumplings and the Social Insurance Agency. China and the bureaucracy: two Sankei favorites. As editorial fodder of course.

One possible casualty of a compromise is Toshirō Mutō, whose appointment as BOJ Governor appeared all but certain (at least to me) until the political fallout from the JMSDF collision further emboldened the opposition. The name of Yasushi Yamaguchi is being floated in the media today as a compromise figure acceptable to the DPJ. Mr. Yamaguchi is a former Deputy Governor, thus all but eliminating the need for a lengthy vetting process. More important, he is a BOJ lifer (in contrast to Mr. Mutō, a Finance Ministry graduate) and thus passes the partlcular separation-of-powers criterion that the DPJ wishes to impose.

Having said that, a one-day rumor will not a BOJ Governor make. I still think that Mr. Mutō is the overwhelming favorite, but stay tuned.

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