Memo on the Consumption Tax

Nothing says Happy New Year like talk of a (consumption) tax hike. Noda got the DPJ to go along by pushing the initial raise to 8% back six months from the original proposal to April 2014, and what’s a few months this way or that, no? Ozawa’s Plan A must be to get acquitted in time to mount a challenge in the DPR leadership election next September against a weakened Noda. Must get busy now; in the meantime, the following is a memo that I wrote a little over a week ago around the issue. I hope that you find it relevant. Finally, I wish you all nothing but happiness and joy in the year to come and thereafter.

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1. A majority of the Japanese public believes that a consumption tax hike is inevitable. The 1988 introduction of the consumption tax was highly unpopular with the Japanese public.
2. Big business generally supports a consumption tax hike. There is no overt opposition from SMEs, who, like big business, a) do not like the government's idea of shifting the growing burden of the social safety net on the shoulders of businesses (pushing 20-30 hour workweek employees into the Kosei Nenkin hurts big and small business alike) and b) would like to see the corporate tax instead. The 1988 introduction of the consumption tax was fiercely opposed by SMEs and many other businesses
3. The MSM generally supports a consumption tax hike. The MSM was split in 1988.
4. The LDP has supported a consumption tax hike. The opposition parties were strongly opposed in 1988.
5. Public disgust over the Recruit scandal that contaminated virtually the entire LDP leadership likely had some effect on the1990 election results. Besides, the 1986 election results were exceptional, making the 1990 results look worse that it is in a historical context. The 3% to 5% hike did not keep Hashimoto and the LDP from winning in the 1996 election, already well into the post-bubble decade.

So what's the problem?
1. Public mistrust of the conventional political class. The lack of political leadership and policy consistency has sapped the credibility of both major parties in asking the public to pony up. (That is why the largely symbolic (in fiscal terms) value of a notional downsized Diet is taking on significance.) The DPJ has had a longer distance to fall, which they did because only a small fraction of the promised savings materialized in its first three years in power. (There were of course Hatoyama's Futenma debacle and incoherence and Kan's inability to articulate and execute. Noda has so far proved (sic) pedestrian, though his persistence should prove useful in getting a compromise on the consumption tax.)
2. Poor economy. The argument is that this is not the time to put the brakes on consumption. That's a reasonable argument, although a trigger for 2013, BTW the more likely arrangement, should take care of it. (Economists and analysts argue over the effect on consumption and savings. I'm not competent to go into that; suffice to say that opponents bring up this argument and many of them no doubt believe it.)
3. The battle for the periphery. The DPJ won the (upper house) 2007 and 2009 elections in part by capturing seats in the periphery, many in districts in traditional LDP strongholds--with low-income, elderly demographics, who will feel relatively more pain from the tax hike. (To be fair, the DPJ also win in the metropolitan districts.) The LDP wants those voters back in their fold, while DPJ parliamentarians with insecure seats (presumably skewed heavily toward Ozawa allies and dependents) will be tempted to vote for their constituents' purses.

2012 should be a good year for the economy, while economists largely agree that it will be less so in 2013. Arguably, it's now or never for the Noda administration. But it can't do anything about the mistrust. But neither can the LDP. Public perception that the LDP is opposing a tax hike--and that's only if they actually manage to cohere around a clear position in opposition--for purely tactical reasons will cause significant damage to the LDP as well. One possibility lies in ganging up on the smaller parties and place the bulk of the consequences of downsizing on the proportional seats, make a compromise on a trigger-equipped consumption tax bill, then let Diet members vote their conscience. There is a huge upside/downside risk here, though. The likelihood of lopsided results become much higher with a smaller proportional-seat cushion. And voting their conscience may only delay the onset of thoroughgoing realignment. Also militating against the compromise that I suggest would be the LDP-Komeito campaign alliance, which the LDP would be loath to give up.

Those are my thoughts as of now. I know there is no convincingly overriding scenario here; all I'm sure of is that the LDP can't let Noda have his consumption tax and declare victory, nor can Noda drop the consumption tax hike and go on as if the whole series of events had never happened.

My Thoughts around the Nine Defectors and Beyond

It was more like minutes than hours, wasn’t it? So what kind of people bolted the DPJ today over the prospective consumption tax hike to form a new party? Mainly proportional-only candidates, most of whose prospects of reelection in anything but a landslide by the DPJ are nil, that’s who*. For these people, their best chances would lie in running as bi-candidates in a new party and hope that the new party wins enough votes (and they lose by small enough margins) to allow them to make it back as zombies.

Beyond that, my guesstimate says that the DPJ could win 180 out of the 304 first-past-the-post districts—the DPJ won 227 in 2009—and the DPJ’s 45 proportional-only incumbents would still be in danger of being wiped out**. It’s not a good time to be a DPJ Diet member who doesn’t have a single-seat district to hedge his/her bet and be eligible to compete with all the other bi-candidates for zombie status. But running in a single-seat district will cost you, so it’s not a viable option unless you’re deep-pocketed or willing to bet the farm.

There was another DPJ defector today, but that’s more the subject of comedy. I might go back to it tomorrow.

* Akira Uchiyama(3rd term) South Kanto ranked 1st, among DPJ proportionals; lost Chiba 7th; Ozawa group
Koichiro Wtanabe (2nd) Tokyo 29th among DPJ proportionals, of whom 23rd-29th got in; Ozawa; habitual loser
Juntaro Toyoda (2nd) Kinki 51st, 45th-52nd; Ozawa; repeat loser (one win in 1993)
Mitsuji Ishida (1st) South Kanto 37th, 37-39th; Ozawa; one-time prefectural assembly election loser
Masae Kobayashi (1st) Tokai 39th; 34th-41st; Ozawa; mayoral election loser
Yoshinori Saito (1st) (斎藤恭紀〈１〉（宮城２区）鳩山
Atsushi Chugo (1st) South Kanto 1st , lost Chiba 12th; Ozawa; two-time municipal assembly winner
Nobuki Miwa (1st) Tokai 38th, 34th-41st; Ozawa; four-time prefectural assembly winner
Yoshihiko Watanabe (1st) Kinki 48th, 45th-52nd; Ozawa; two-time loser, hid bankruptcy procedures to remain on DPJ list
** There are ways to develop more detailed estimates, but I’m not sure it’s worth my time unless I’m getting paid for it.

Who Will Jump the DPJ Ship over a Consumption Tax Hike?

For now, only a couple of handfuls, if the Asahi is to be believed. We’ll know in a matter of hours, if not days, but in the meantime, here are a few thoughts around the report that may be useful beyond the immediate future.

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So far, prospective defectors are small in number and are mainly (but not exclusively) first-term Ozawa children (Miwa is a ripe old 69) in the lower house representing the urban expanse between the true outback and the Tokyo/Nagoya/Osaka metropolitan. No upper house names have emerged.

How will they fare in a snap election? Intuitively, not so good. They will have to share the anti-consumption tax hike vote with Your Party, who will also be able to 1) run candidates in more districts, which will help it gather proportional votes, and 2) position itself as the reformist alternative. There are many other factors to be considered, some positive (Yasunori Saito, who has local celebrity status, will rake in votes outside his district; people like Nobuaki Miwa, who have independent political capital, maybe able to wrest away a larger part of the local DPJ chapter than otherwise possible), some negative (political novice rookies may not be able to take much of the local DPJ party machine away with him). All things considered, expect a few other multi-term Diet members as well a rookie or two that have strong local assembly backgrounds to make the leap, calculating that, at worst, they can slip back in on the proportional tickets. Conversely, pure political rookies will not jump ship unless Ozawa jumps with them.

From My Email: Pop Culture, and a Discovery about AKB 48 (What Else?)

A couple of people and I got to talking about W. David Marx and Cool Japan, which got me to thinking about Japanese pop culture. The following is the relevant part of an email, uncensored, with one word corrected, one punctuation mark removed, font changed, and, oh yes, a hyperlink added. Otherwise, RAW. I think that I’ve picked up on something that no one, anywhere, has noticed.

Also, I’m seriously thinking about posting something mean-spirited about Ronald Dore. What do you think?

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The best way to kill off One Piece (which I never liked BTW) would be to have the MEXT political team do a public announcement endorsing it. (On the other hand, PM Noda is a dead ringer for Komawari-kun, if they ever get around to doing a live-action version...)

Speaking of popular culture, look at the following list of AKB 48 members who have finished in the top 10 in voting, with their top finishes.

O Ohshima Yuko 大島優子 1
O Maeda Atsuko 前田敦子 1
O Shinoda Mariko 篠田麻里子 3
O Itano Tomomi 板野友美 4
C Watanabe Mayu 渡辺麻夕 4
C Takahashi Minami 高橋みなみ 5
C Kojima Haruna 小嶋陽菜 6
C Satoh Amina 佐藤亜美菜 8
VO Miyazawa Sae 宮澤佐江 9
O Kasai Tomomi 河西智美 10

"O" as in old-fashioned, "C" as in contemporary, "VO" as in...very old. Old-fashioned means that they would have been the kind of names that were predominant as I was growing up. Let me also note that "Tomomi" is gender-free (岩倉具視, haha）, although most three-syllable "-mi" names are more likely to be conferred on females. Contemporary means the kind of names that girls in their teens and twenties typically have. Very old means Meiji-, Taisho-old. As further proof of how name preferences have changed, there is only one other "-ko" in the whole bunch. (To be fair, her top finish so far has been 38. Next AKB member to bare all?) In fact, beyond these nine most popular members, contemporary names predominate the list. Is this all just coincidence? I think not.

Finally, as an example of: Japan Cool (not Cool Japan) influence .

Personally, I miss the old version . I must be growing old.

Have a nice weekend.