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.
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.
Showing posts with label tax reform. Show all posts
Showing posts with label tax reform. Show all posts
Saturday, December 31, 2011
Saturday, May 10, 2008
Gasoline Taxes Potpourri
For the first quarter of 2008, the average state gasoline tax is 28.6 cents per gallon, plus 18.4 cents per gallon federal tax making the total 47 cents per gallon. For diesel, the average state tax is 29.2 cents per gallon plus an additional 24.4 cents per gallon federal tax making the total 53.6 cents per gallon.
—from Motor Fuel Taxes, American Petroleum Institute
Let's do the conversion math. For gasoline, that’s a 4.86 cent/liter federal tax and a 7.56 cent/liter state tax for 12.42 cents in federal and state taxes per liter. For diesel oil, the respective figures are 6.45 cents, 7.71 cents, and 14.16 cents.
The so-called gasoline tax in Japan consists of a 5.2 yen/liter local road tax and 48.6 yen/liter volatile oil tax, for a total of 53.8 yen/liter. The “temporary” surcharge accounts for 24.3, 0.8, and 23.8 yen/liter, respectively. The light oil (i.e. diesel fuel) tax 32.1 yen/liter, of which 17.1 yen is the “temporary” surcharge.
There’s more:
You know, I think Americans would be shocked to learn that only about 60 percent of the gas tax money that they pay today actually goes into highway and bridge construction. Much of it goes in many, many other areas.
—2007 August 17; Mary Peters, U.S. Secretary of Transportation
By contrast, most of the Japanese gasoline tax money goes into the construction and maintenance of roads, including some very expensive bridges. Yes, the U.S. highway system may be going to pot. Yes, compensating Japanese landowners is expensive, and so is building against earthquakes. Still, I see a good prima facie case that Japanese roads can do without a lot of that money without risking pothole epidemics and collapsing bridges. In fact, as an American journalist said to me the other day, a few potholes here and there would have the salutary effects of showing that we weren’t overspending.
Last month, 42 of the 47 prefectural governors in Japan told Yomiuri that they wanted to maintain the surcharge, and none of the other five opposed it outright. With regard to putting the money into the general funds, only four governors supported it. On the other hand, only 11 opposed it outright. Most of them must be waiting to see how much of the money would continue to be shoveled back into their coffers and local economies before they break either way. The Tokyo governor is a strong supporter of the status quo; wealthy Tokyo has no problems in meeting the local copayment requirements for national road project and still have more than enough money to finance the rest of its own projects—roads or otherwise. Better then, to have the money spent on Tokyo roads rather than run the risk of the national government taking a bigger cut or shunting the money to the poorer prefectures. Those poorer prefectures on the other hand would benefit from string-free cash handouts as long as they didn’t lose money in the bargain.
These governors aren’t that far off from their constituents as the two-, three-to-one public opinion polls running against the maintenance of the status quo would seem to indicate. This Asahi poll shows that the 67% who supported putting the revenue into the general funds were split 44%-44% on the reinstatement of the surcharge in the event of the handover to the general funds. That’s 29% of the sample group, much higher than the 22% who support the reinstatement of the surcharge outright. Now there may be some overlap between the two numbers (I have no way of knowing unless I see the full survey results), but the results do suggest that the Japanese public by and large would support the retention of the surcharge if the government coupled it with a major overhaul of the road development program and its implementation process and a revision of the program’s place in the list of national priorities. Can the Fukuda administration and the ruling coalition do it this fall? I am increasingly skeptical.
If the Fukuda administration wants to put the road money in the general funds come fiscal year 2009, why doesn’t it just drop the 10-year extension of the pending special bill and use the money in the FY2008 road budget, which has already been passed?
Because the special bill is needed to extend special rates for subsidies that the national government doles out to local governments. Without it, the subsidy rates would revert to the lower “normal” rates, throwing local budgets out of whack.
—from Motor Fuel Taxes, American Petroleum Institute
Let's do the conversion math. For gasoline, that’s a 4.86 cent/liter federal tax and a 7.56 cent/liter state tax for 12.42 cents in federal and state taxes per liter. For diesel oil, the respective figures are 6.45 cents, 7.71 cents, and 14.16 cents.
The so-called gasoline tax in Japan consists of a 5.2 yen/liter local road tax and 48.6 yen/liter volatile oil tax, for a total of 53.8 yen/liter. The “temporary” surcharge accounts for 24.3, 0.8, and 23.8 yen/liter, respectively. The light oil (i.e. diesel fuel) tax 32.1 yen/liter, of which 17.1 yen is the “temporary” surcharge.
There’s more:
You know, I think Americans would be shocked to learn that only about 60 percent of the gas tax money that they pay today actually goes into highway and bridge construction. Much of it goes in many, many other areas.
—2007 August 17; Mary Peters, U.S. Secretary of Transportation
By contrast, most of the Japanese gasoline tax money goes into the construction and maintenance of roads, including some very expensive bridges. Yes, the U.S. highway system may be going to pot. Yes, compensating Japanese landowners is expensive, and so is building against earthquakes. Still, I see a good prima facie case that Japanese roads can do without a lot of that money without risking pothole epidemics and collapsing bridges. In fact, as an American journalist said to me the other day, a few potholes here and there would have the salutary effects of showing that we weren’t overspending.
Last month, 42 of the 47 prefectural governors in Japan told Yomiuri that they wanted to maintain the surcharge, and none of the other five opposed it outright. With regard to putting the money into the general funds, only four governors supported it. On the other hand, only 11 opposed it outright. Most of them must be waiting to see how much of the money would continue to be shoveled back into their coffers and local economies before they break either way. The Tokyo governor is a strong supporter of the status quo; wealthy Tokyo has no problems in meeting the local copayment requirements for national road project and still have more than enough money to finance the rest of its own projects—roads or otherwise. Better then, to have the money spent on Tokyo roads rather than run the risk of the national government taking a bigger cut or shunting the money to the poorer prefectures. Those poorer prefectures on the other hand would benefit from string-free cash handouts as long as they didn’t lose money in the bargain.
These governors aren’t that far off from their constituents as the two-, three-to-one public opinion polls running against the maintenance of the status quo would seem to indicate. This Asahi poll shows that the 67% who supported putting the revenue into the general funds were split 44%-44% on the reinstatement of the surcharge in the event of the handover to the general funds. That’s 29% of the sample group, much higher than the 22% who support the reinstatement of the surcharge outright. Now there may be some overlap between the two numbers (I have no way of knowing unless I see the full survey results), but the results do suggest that the Japanese public by and large would support the retention of the surcharge if the government coupled it with a major overhaul of the road development program and its implementation process and a revision of the program’s place in the list of national priorities. Can the Fukuda administration and the ruling coalition do it this fall? I am increasingly skeptical.
If the Fukuda administration wants to put the road money in the general funds come fiscal year 2009, why doesn’t it just drop the 10-year extension of the pending special bill and use the money in the FY2008 road budget, which has already been passed?
Because the special bill is needed to extend special rates for subsidies that the national government doles out to local governments. Without it, the subsidy rates would revert to the lower “normal” rates, throwing local budgets out of whack.
Friday, April 25, 2008
Can DPJ Dissenters Join the Ruling Coalition on the Other Side of the Road Money?
I swear I've never spent so much time on a single post. And it still needs editing. But I’ve run out of energy. Now back to life…
Tetsuro Yano is a three-term member of the House of Councilors (HC) whose only claim to national fame came last August during the wholesale Cabinet reshuffle that Prime Minister Abe undertook in a vain attempt to revive his political fortunes after the disastrous HC election the month before.
Many people, including Mr. Yano himself, had believed that he would be appointed to the Cabinet as one of two slots always reserved for the HC. Unfortunately, Mr. Abe was not among them, and kept Mr. Yano waiting in vain for the phone call that never came. (Mssrs. Yoichi Masuzoe and Shinichi Izumi got the nod.) Mr. Yano is not one to take things lying down, and made his displeasure known on national TV. He also called Mr. Abe and, if media reports are true, delivered a 25-munite diatribe.
Now, Mr. Yano is in the news again for giving a talk on April 23 in his home district where he claimed, “Some people are now emerging [among the DPJ HC members] who are willing to work with us. Pretty soon, those people are going to set up on their own.” The bone of contention is, of course, the gasoline tax revenue and its uses.
Coming from most people, this would be dismissed as mere pre-election tongue-wagging. That Mr. Yano is a member of the Ibuki faction--Bunmei Ibuki is the hardtalking Secretary-General of the LDP--raise more flags. However, the HC is a clubby place, and Mr. Yano worked closely with the opposition as the Chairman of the LDP’s HC Diet Affairs Committee between 2004 and 2007, so he should have a better-than-average idea of what’s going on in the hearts and minds of the people across the HC aisle than most of his LDP colleagues do. Then there’s Yasuhiro Ōe, the rebellious DPJ Councilor who claimed more than a month ago that he had the signatures of 39 DPJ Diet members (including 25 in the all-important HC) on a petition opposing the elimination of the surcharge.
But will enough DPJ Councilors break ranks and vote for or at least abstain from voting on the Fukuda administration’s tax bill to reinstate the surcharge? And if they do, will they break away to form a new party, or even join the LDP? If I had to make a guess, I’d say, possible, but unlikely.
On one hand, public works brings together one of the most powerful agglomerations of vested interests imaginable. Representatives of the provinces, whose economies are highly reliant on public expenditures, not to mention other old school, pork-barrel politicians, will find their beseeching hard to ignore. On the other hand, the DPJ wants to push the Fukuda administration and the ruling coalition over the edge on the issue, so the party leadership will come down more heavily on dissenters than in the case of the BOJ appointments*. In fact, there appears to be a real likelihood that the DPJ leadership will make it so uncomfortable for any members who vote with the ruling coalition on the tax bill that they will have no choice but to, in the words of Mr. Yano, “set up on their own”. Here, note that two of the likely ringleaders, Yasuhiro Ōe (2007), next to last, and Hideo Watanabe (2004) hold proportional seats. This is important.
Mssrs. Ōe and Watanabe and other HC proportional members in the DPJ, with their strong though limited local ties, are likely to find the siren call of the vested interests and assemblymen and mayors and governors hard to resist. But they have little appeal beyond their immediate environs, and as a result will have a hard time attracting votes over and above what they can carry over individually from their old DPJ haunts. Banding together, they will manage to elect the top vote-getters on their proportional candidates list, but the others will surely wind up losing their seats. They could stand for election in the prefectural districts in parallel, but that’s where they would be in the first place if they had sufficient local appeal, wouldn’t they? In fact, many of them are local losers who made it on the national list, so they would wind up being caught in the crossfire as the quasi-LDP, third-party candidate.
It turns out that Mssrs. Ōe and Watanabe are perfect examples of those likely losers. The DPJ won 19 proportional seats (allocated on a national basis) to the LDP’s 15 in the 2004 HC election, enabling Mr. Watanabe to scrape through at the very bottom, as the 19th highest vote-getter among the DPJ candidates. The DPJ was even more successful in the 2007 HC election, winning 20 proportional seats to the LDP’s 14, DPJ landslide victory, where Mr. Ōe slipped past the stiles in, yes, 19th place. In other words, in both cases, if the DPJ margin of victory in the popular vote had been much lower, they would very likely be out of a job now.
Would it help them to join the LDP outright then? Not necessarily. Mssrs. Ōe and Watanabe both received substantially less votes than the LDP proportional Councilors-elect with the least individual votes in the respective elections. Barring an LDP victory of 2004/2007 DPJ proportions, it is likely that they will lose their seats in their next elections.
Likeminded DPJ cohorts may be in a better position to bolt and hold onto their proportional seats. But remember, the number of seats that a party receives will be determined by the total of the votes for the entire party. A splinter party consisting of members with no national name recognition and without the money to field a large number of candidates with local appeal will be little more than the sum of its parts. A safe proportional seat in a big party would be at serious risk in a minor upstart. Those figures would be advised to switch to the LDP, rather than start a new one. Since we don’t have their names, it is impossible to be sure how many of them there are. What is clear is that their interests are not necessarily consonant with those of the two of the most prominent dissidents.
Yoshitake Kimata voted for Toshirō Mutō and was slapped with a one-month suspension, and is thus seen as a possible co-conspirator. He is elected from Aichi Prefecture, so he will not suffer from the same constraints that make a rebellion problematic for many proportional seat-holders. So could he join the LDP. But Aichi is a DPJ stronghold, with support from its powerful, moderate wing of the labor movement, with which global industrial giant Toyota has enjoyed very good relations. Mr. Kimata was himself one of two DPJ Councilors elected in the 2007 victory. The lone 2007 LDP incumbent will be very reluctant to compete against another LDP incumbent for what is likely to end up as one, not two, LDP seat in the 2013 HC elections. Other Councilors elected from prefectural districts may have an easier time of it, but in the 18 multiple-seat election provinces (with 4 or more seats, so that 2 or more are contested in any election), they could face fierce opposition from the LDP incumbents. Mr. Kimata and his non-proportional cohorts do have the option of setting up a party of their own. Good luck contesting the next elections as a small, quasi-LDP offshoot from the DPJ.
What is likely to happen, then?
Assuming that it continues to receive the unanimous support of the 105 LDP and Komeito Councilors, the Fukuda administration needs 17 non-coalition votes, 33 non-coalition abstentions, or combinations thereof for a HC majority. With more to lose either way, many potential DPJ dissenters will be strongly tempted to catch the flu, miss a connecting flight, anything, just to avoid voting at all. So if I’m reading the situation correctly, dissent will be expressed mainly through abstention and there won’t be many outright crossovers. That means that the coalition will require a fairly large number, much closer to the maximum 33 than the minimum 17, to step out of line if it is to gain a working HC majority. That seems like a tall order, though I don’t have the data to do a one-by-one analysis.
So far, I’ve argued that the opposition is more likely than not to be able to hold the line. But since I’ve been wrong quite often--not that professional pundits do a particularly good job of foretelling the twists and turns of the political game very well--it’s probably prudent to do a what-if and consider what sufficient crossover would mean to the coalition’s fortunes.
It is easy to think that this would yield immediate benefits to the LDP. They could very likely do more than just pass the tax and road bills without resorting to the House of Representatives supermajority override vote. In fact, in the case of an irrevocable DPJ split, they would be able to pass other contested bills as well.
But would the tactical success be a good thing for the LDP’s fortunes? I don’t think so. The would-be rebels are not going to bolt the DPJ just to put off the transfer of the gasoline tax money to general-purpose funds to FY2009 as the Fukuda administration intends instead of immediately as the DPJ demands, or just to reinstate the surcharge for the greater good as the Fukuda administration claims, but to keep as much of the money as possible for roads, earmark or no earmark. The would-be rebels will surely spare no effort to leverage their hold on the legislative fortunes of the coalition to achieve that aim.
This leverage that vested interests will be able to exercise on the end uses of the gasoline tax revenue will be bad enough on its own. But Prime Minister Fukuda has promised, with the post facto approval of the ruling coalition, to eliminate the earmark as part of “thoroughgoing” tax reform this autumn. In other words, Mr. Fukuda, he has linked the maintenance of the surcharge with what is very likely to be a substantial, albeit phased in, hike of the consumption tax, currently standing at 5%.
Now the public understands, in principle, the inevitability of a greater tax burden. But it has seen ample evidence of waste, corruption, and plain indifference; it will be ill-disposed to accept any tax package that is not accompanied by credible reform on the administration and expenditure of public funds. The public pension and healthcare systems are an obvious example of this; the road development and maintenance program is another. Mr. Fukuda faces a formidable task in putting together a publicly credible package by autumn. It will become even more daunting if vested interests could hold the gasoline tax revenues as hostage in return for their political support.
The coalition should be careful what it wishes for, don’t you think?
* I posted on the matter here. The three dissenters merely received “severe admonishments”.
Tetsuro Yano is a three-term member of the House of Councilors (HC) whose only claim to national fame came last August during the wholesale Cabinet reshuffle that Prime Minister Abe undertook in a vain attempt to revive his political fortunes after the disastrous HC election the month before.
Many people, including Mr. Yano himself, had believed that he would be appointed to the Cabinet as one of two slots always reserved for the HC. Unfortunately, Mr. Abe was not among them, and kept Mr. Yano waiting in vain for the phone call that never came. (Mssrs. Yoichi Masuzoe and Shinichi Izumi got the nod.) Mr. Yano is not one to take things lying down, and made his displeasure known on national TV. He also called Mr. Abe and, if media reports are true, delivered a 25-munite diatribe.
Now, Mr. Yano is in the news again for giving a talk on April 23 in his home district where he claimed, “Some people are now emerging [among the DPJ HC members] who are willing to work with us. Pretty soon, those people are going to set up on their own.” The bone of contention is, of course, the gasoline tax revenue and its uses.
Coming from most people, this would be dismissed as mere pre-election tongue-wagging. That Mr. Yano is a member of the Ibuki faction--Bunmei Ibuki is the hardtalking Secretary-General of the LDP--raise more flags. However, the HC is a clubby place, and Mr. Yano worked closely with the opposition as the Chairman of the LDP’s HC Diet Affairs Committee between 2004 and 2007, so he should have a better-than-average idea of what’s going on in the hearts and minds of the people across the HC aisle than most of his LDP colleagues do. Then there’s Yasuhiro Ōe, the rebellious DPJ Councilor who claimed more than a month ago that he had the signatures of 39 DPJ Diet members (including 25 in the all-important HC) on a petition opposing the elimination of the surcharge.
But will enough DPJ Councilors break ranks and vote for or at least abstain from voting on the Fukuda administration’s tax bill to reinstate the surcharge? And if they do, will they break away to form a new party, or even join the LDP? If I had to make a guess, I’d say, possible, but unlikely.
On one hand, public works brings together one of the most powerful agglomerations of vested interests imaginable. Representatives of the provinces, whose economies are highly reliant on public expenditures, not to mention other old school, pork-barrel politicians, will find their beseeching hard to ignore. On the other hand, the DPJ wants to push the Fukuda administration and the ruling coalition over the edge on the issue, so the party leadership will come down more heavily on dissenters than in the case of the BOJ appointments*. In fact, there appears to be a real likelihood that the DPJ leadership will make it so uncomfortable for any members who vote with the ruling coalition on the tax bill that they will have no choice but to, in the words of Mr. Yano, “set up on their own”. Here, note that two of the likely ringleaders, Yasuhiro Ōe (2007), next to last, and Hideo Watanabe (2004) hold proportional seats. This is important.
Mssrs. Ōe and Watanabe and other HC proportional members in the DPJ, with their strong though limited local ties, are likely to find the siren call of the vested interests and assemblymen and mayors and governors hard to resist. But they have little appeal beyond their immediate environs, and as a result will have a hard time attracting votes over and above what they can carry over individually from their old DPJ haunts. Banding together, they will manage to elect the top vote-getters on their proportional candidates list, but the others will surely wind up losing their seats. They could stand for election in the prefectural districts in parallel, but that’s where they would be in the first place if they had sufficient local appeal, wouldn’t they? In fact, many of them are local losers who made it on the national list, so they would wind up being caught in the crossfire as the quasi-LDP, third-party candidate.
It turns out that Mssrs. Ōe and Watanabe are perfect examples of those likely losers. The DPJ won 19 proportional seats (allocated on a national basis) to the LDP’s 15 in the 2004 HC election, enabling Mr. Watanabe to scrape through at the very bottom, as the 19th highest vote-getter among the DPJ candidates. The DPJ was even more successful in the 2007 HC election, winning 20 proportional seats to the LDP’s 14, DPJ landslide victory, where Mr. Ōe slipped past the stiles in, yes, 19th place. In other words, in both cases, if the DPJ margin of victory in the popular vote had been much lower, they would very likely be out of a job now.
Would it help them to join the LDP outright then? Not necessarily. Mssrs. Ōe and Watanabe both received substantially less votes than the LDP proportional Councilors-elect with the least individual votes in the respective elections. Barring an LDP victory of 2004/2007 DPJ proportions, it is likely that they will lose their seats in their next elections.
Likeminded DPJ cohorts may be in a better position to bolt and hold onto their proportional seats. But remember, the number of seats that a party receives will be determined by the total of the votes for the entire party. A splinter party consisting of members with no national name recognition and without the money to field a large number of candidates with local appeal will be little more than the sum of its parts. A safe proportional seat in a big party would be at serious risk in a minor upstart. Those figures would be advised to switch to the LDP, rather than start a new one. Since we don’t have their names, it is impossible to be sure how many of them there are. What is clear is that their interests are not necessarily consonant with those of the two of the most prominent dissidents.
Yoshitake Kimata voted for Toshirō Mutō and was slapped with a one-month suspension, and is thus seen as a possible co-conspirator. He is elected from Aichi Prefecture, so he will not suffer from the same constraints that make a rebellion problematic for many proportional seat-holders. So could he join the LDP. But Aichi is a DPJ stronghold, with support from its powerful, moderate wing of the labor movement, with which global industrial giant Toyota has enjoyed very good relations. Mr. Kimata was himself one of two DPJ Councilors elected in the 2007 victory. The lone 2007 LDP incumbent will be very reluctant to compete against another LDP incumbent for what is likely to end up as one, not two, LDP seat in the 2013 HC elections. Other Councilors elected from prefectural districts may have an easier time of it, but in the 18 multiple-seat election provinces (with 4 or more seats, so that 2 or more are contested in any election), they could face fierce opposition from the LDP incumbents. Mr. Kimata and his non-proportional cohorts do have the option of setting up a party of their own. Good luck contesting the next elections as a small, quasi-LDP offshoot from the DPJ.
What is likely to happen, then?
Assuming that it continues to receive the unanimous support of the 105 LDP and Komeito Councilors, the Fukuda administration needs 17 non-coalition votes, 33 non-coalition abstentions, or combinations thereof for a HC majority. With more to lose either way, many potential DPJ dissenters will be strongly tempted to catch the flu, miss a connecting flight, anything, just to avoid voting at all. So if I’m reading the situation correctly, dissent will be expressed mainly through abstention and there won’t be many outright crossovers. That means that the coalition will require a fairly large number, much closer to the maximum 33 than the minimum 17, to step out of line if it is to gain a working HC majority. That seems like a tall order, though I don’t have the data to do a one-by-one analysis.
So far, I’ve argued that the opposition is more likely than not to be able to hold the line. But since I’ve been wrong quite often--not that professional pundits do a particularly good job of foretelling the twists and turns of the political game very well--it’s probably prudent to do a what-if and consider what sufficient crossover would mean to the coalition’s fortunes.
It is easy to think that this would yield immediate benefits to the LDP. They could very likely do more than just pass the tax and road bills without resorting to the House of Representatives supermajority override vote. In fact, in the case of an irrevocable DPJ split, they would be able to pass other contested bills as well.
But would the tactical success be a good thing for the LDP’s fortunes? I don’t think so. The would-be rebels are not going to bolt the DPJ just to put off the transfer of the gasoline tax money to general-purpose funds to FY2009 as the Fukuda administration intends instead of immediately as the DPJ demands, or just to reinstate the surcharge for the greater good as the Fukuda administration claims, but to keep as much of the money as possible for roads, earmark or no earmark. The would-be rebels will surely spare no effort to leverage their hold on the legislative fortunes of the coalition to achieve that aim.
This leverage that vested interests will be able to exercise on the end uses of the gasoline tax revenue will be bad enough on its own. But Prime Minister Fukuda has promised, with the post facto approval of the ruling coalition, to eliminate the earmark as part of “thoroughgoing” tax reform this autumn. In other words, Mr. Fukuda, he has linked the maintenance of the surcharge with what is very likely to be a substantial, albeit phased in, hike of the consumption tax, currently standing at 5%.
Now the public understands, in principle, the inevitability of a greater tax burden. But it has seen ample evidence of waste, corruption, and plain indifference; it will be ill-disposed to accept any tax package that is not accompanied by credible reform on the administration and expenditure of public funds. The public pension and healthcare systems are an obvious example of this; the road development and maintenance program is another. Mr. Fukuda faces a formidable task in putting together a publicly credible package by autumn. It will become even more daunting if vested interests could hold the gasoline tax revenues as hostage in return for their political support.
The coalition should be careful what it wishes for, don’t you think?
* I posted on the matter here. The three dissenters merely received “severe admonishments”.
Sunday, April 13, 2008
As Big as the Gasoline Tax Surcharge Is, There’s a Much Bigger Tax (and Spend) Issue in Play
Two important bills have been passed by the House of Representatives and are now in the hands of the House of Councilors: the tax bill that, among other things, extends the gasoline tax surcharges for another ten years to 2018 March 31 (passed by the HR and sent to the HC on February 29); and the bill that extends the minimum level for the dedication of the gasoline tax revenues to road development and maintenance for the same period (passed by the HR and sent to the HC on March 13). The extension of the two measures is a logical consequence of the new ten-year Road Development and Maintenance Plan, which covers the same period.
Prime Minister Fukuda proposed – with subsequent quasi-official endorsement from the LDP and Kōmeitō leadership － to shorten the Road Plan to five years and more likely than not shrink its annual size based on new traffic demand estimates, and turn the road-dedicated funds (gasoline tax revenue) over to general purpose funds starting in 2009. He indicated, as an initial bid at least, to maintain the surcharge rate at its current level(25.1 yen per liter on gasoline), citing such reasons as global warming, international comparison of tax rates, and fiscal necessities. He intends to address that matter as part of a thoroughgoing tax reform. (This is extremely important. Please keep that in mind.)
Note that once you shorten and shrink the Road Plan, the surcharge (and, theoretically, even the base tax rate) must also be shortened and shrunk proportionately － unless the tax is delinked from its original purpose of developing and maintaining roads. By ceding the gasoline tax revenue to general purpose funds as part of a long-promised tax reform, the Fukuda proposal opens the door to keeping the gasoline tax at its current level indefinitely by subsuming the surcharge into the permanent tax rate. Within the LDP, this invokes the support of the fiscal hawks (people like Kaoru Yosano and Sadakazu Tanigaki), who want to take major steps to balance the budget but want to limit as much as possible what looks like an inevitable consumption tax hike; and the reformists (Junichirō Koizumi first and foremost), who want to complete unfinished business in the Koizumi reform (charitably describable as incomplete with regard to vested interests in the road money).
There is the predictable talk in the tabloids of the collapse of the Fukuda Cabinet as early as next month as the result of the battle between the reformists and the road tribe. I don’t see that happening. True, the bill currently in the hands of the HC extending the revenue dedication for another ten years － it is supposed to be eliminated in FY2009 － doesn’t make sense. However, the DPJ is holding out for an immediate discontinuation of the dedication, so it is unlikely to cooperate in amending the current bill now languishing in the HC to accommodate a one-year extension, and it doesn’t make sense for reformists to split the party and join hands with the DPJ just so the mandatory dedication can be discontinued a year earlier (while the actual budgetary allocation for this fiscal remains intact)*. It’s not impossible, but certainly improbable. Besides, on that specific issue, they can always split the party to far greater political effect if the LDP majority ultimately winds up rejecting the Fukuda proposal to end the dedication. That slightly more plausible but still highly unlikely event cannot happen until much later, in the lead-up to the throw-down with the DPJ over tax reform that begins in earnest in the fall.
The most serious potential for a reformist/roadist conflict lies in the debate over the substance of the Road Plan. The Plan will be by far the most important determinant of the eventual allocation of the revenue from the general purpose funds to road development and maintenance. There are two issues here: the length of the plan, and its size.
The five-year truncation will not be an issue, once the LDP and New Kōmeitō and the Cabinet take the necessary measures at the beginning of this workweek to bring the full authority of the ruling coalition and the administration to the Fukuda proposal. The New Kōmeitō is almost as well-disciplined as the Communist Party. In the LDP, the measure should have no trouble going through the Research Commission on the Tax System headed by fiscal hawk Shūji Tsushima and the Policy Research Council headed by the like-minded Sadakazu Tanigaki. The usually rubber stamp General Council gives the final authorization, but it is currently chaired by Toshihiro Nikai, who, together with Makoto Koga, head of Election Strategy Headquarters, are the two hetmen of the road tribe. However, the two kings of the roads gave their consent at the Wednesday meeting, so they will not give Mr. Fukuda any trouble here.
It is the determination of the amount that will give the Fukuda administration headaches. The fiscal hawks will make common cause with the reformists in battling the road tribe under the close scrutiny of the media and the opposition playing to an already mistrustful public. I expect that the coalition will come up with a new Plan, and agree to apportion the gasoline tax revenue accordingly. I have no idea what the public perception of the ultimate coalition package will be like. What I can be sure of is that the opposition’s response will driven largely by the public’s response, which in turn will largely molded by how it is received and depicted in the media.
But note that this is only part of the picture. At the same time, the ruling coalition must come up with a “thoroughgoing tax reform” package that places the gasoline taxes and the surcharge in proper context. The relationship is not trivial, by the way; the surcharge by itself is the rough equivalent of one percentage point of the consumption tax, currently at 5%.
A comprehensive tax package will have far greater political implications as an issue than the gasoline tax revenue. Fiscal policy perspectives cut across party lines, while the DPJ will also face a public reckoning of the fiscal consequences of the various promises that it has made under Mr. Ozawa’s leadership. This process will commence in full this fall and must be completed in substance by the end of the calendar year. Moreover, the ruling coalition must schedule possibly months of intensive negotiations with the opposition even if, or particularly if, it intends to exercise the HR supermajority override in the end. There will undoubtedly be major surprises as the process unfolds. The road money is a significant part of this process, but just that: only a part.
As a final note, it is important to remember that at least some of this can indeed happen under a different Prime Minister. Last Wednesday’s Diet faceoff with Ichirō Ozawa has been widely panned by the media and even some serious LDP politicians such as Tarō Asō and Kaoru Yosano, two men the media are playing up as pretenders to the Prime Minister’s seat. Although I only read an excerpted summary in the Sankei, in what I read, Mr. Fukuda came across as oddly querulous and plaintive, like an aging lover spurned in a 19th Century romance novel (or so one imagines). More seriously, this morning on Sunday Project, Mr. Yasano leveled strong criticism at the Prime Minister’s Office. Although it was an implicit indictment of Nobutaka Machimura, the Chief Cabinet Secretary who replaced him and perhaps the Administrative Deputy Chief Cabinet Secretary as well, the hint of leadership failure at an even higher level was also hard to miss.
I do not yet think that a premature departure is more likely than not. A Prime Minister has substantial staying power if he is willing to use the full arsenal of weapons available to him, Remember, Prime Minister Abe stayed on even after the disastrous 2007 HC election defeat and only left when his health finally failed him. Still, compared to fiscal reform that requires a consumption tax hike, the gasoline tax surcharge is almost a gimmie. Prime Minister Fukuda will not be able to get away with forcing his will on a divided coalition the way he did with his proposal on the road money. He will need every bit of help from the reformists and fiscal hawks to survive. He will also have to draw in likeminded Diet members from the opposition, mainly in the DPJ. One thing for sure: the tax package will make or break the Fukuda administration.
Prime Minister Fukuda proposed – with subsequent quasi-official endorsement from the LDP and Kōmeitō leadership － to shorten the Road Plan to five years and more likely than not shrink its annual size based on new traffic demand estimates, and turn the road-dedicated funds (gasoline tax revenue) over to general purpose funds starting in 2009. He indicated, as an initial bid at least, to maintain the surcharge rate at its current level(25.1 yen per liter on gasoline), citing such reasons as global warming, international comparison of tax rates, and fiscal necessities. He intends to address that matter as part of a thoroughgoing tax reform. (This is extremely important. Please keep that in mind.)
Note that once you shorten and shrink the Road Plan, the surcharge (and, theoretically, even the base tax rate) must also be shortened and shrunk proportionately － unless the tax is delinked from its original purpose of developing and maintaining roads. By ceding the gasoline tax revenue to general purpose funds as part of a long-promised tax reform, the Fukuda proposal opens the door to keeping the gasoline tax at its current level indefinitely by subsuming the surcharge into the permanent tax rate. Within the LDP, this invokes the support of the fiscal hawks (people like Kaoru Yosano and Sadakazu Tanigaki), who want to take major steps to balance the budget but want to limit as much as possible what looks like an inevitable consumption tax hike; and the reformists (Junichirō Koizumi first and foremost), who want to complete unfinished business in the Koizumi reform (charitably describable as incomplete with regard to vested interests in the road money).
There is the predictable talk in the tabloids of the collapse of the Fukuda Cabinet as early as next month as the result of the battle between the reformists and the road tribe. I don’t see that happening. True, the bill currently in the hands of the HC extending the revenue dedication for another ten years － it is supposed to be eliminated in FY2009 － doesn’t make sense. However, the DPJ is holding out for an immediate discontinuation of the dedication, so it is unlikely to cooperate in amending the current bill now languishing in the HC to accommodate a one-year extension, and it doesn’t make sense for reformists to split the party and join hands with the DPJ just so the mandatory dedication can be discontinued a year earlier (while the actual budgetary allocation for this fiscal remains intact)*. It’s not impossible, but certainly improbable. Besides, on that specific issue, they can always split the party to far greater political effect if the LDP majority ultimately winds up rejecting the Fukuda proposal to end the dedication. That slightly more plausible but still highly unlikely event cannot happen until much later, in the lead-up to the throw-down with the DPJ over tax reform that begins in earnest in the fall.
The most serious potential for a reformist/roadist conflict lies in the debate over the substance of the Road Plan. The Plan will be by far the most important determinant of the eventual allocation of the revenue from the general purpose funds to road development and maintenance. There are two issues here: the length of the plan, and its size.
The five-year truncation will not be an issue, once the LDP and New Kōmeitō and the Cabinet take the necessary measures at the beginning of this workweek to bring the full authority of the ruling coalition and the administration to the Fukuda proposal. The New Kōmeitō is almost as well-disciplined as the Communist Party. In the LDP, the measure should have no trouble going through the Research Commission on the Tax System headed by fiscal hawk Shūji Tsushima and the Policy Research Council headed by the like-minded Sadakazu Tanigaki. The usually rubber stamp General Council gives the final authorization, but it is currently chaired by Toshihiro Nikai, who, together with Makoto Koga, head of Election Strategy Headquarters, are the two hetmen of the road tribe. However, the two kings of the roads gave their consent at the Wednesday meeting, so they will not give Mr. Fukuda any trouble here.
It is the determination of the amount that will give the Fukuda administration headaches. The fiscal hawks will make common cause with the reformists in battling the road tribe under the close scrutiny of the media and the opposition playing to an already mistrustful public. I expect that the coalition will come up with a new Plan, and agree to apportion the gasoline tax revenue accordingly. I have no idea what the public perception of the ultimate coalition package will be like. What I can be sure of is that the opposition’s response will driven largely by the public’s response, which in turn will largely molded by how it is received and depicted in the media.
But note that this is only part of the picture. At the same time, the ruling coalition must come up with a “thoroughgoing tax reform” package that places the gasoline taxes and the surcharge in proper context. The relationship is not trivial, by the way; the surcharge by itself is the rough equivalent of one percentage point of the consumption tax, currently at 5%.
A comprehensive tax package will have far greater political implications as an issue than the gasoline tax revenue. Fiscal policy perspectives cut across party lines, while the DPJ will also face a public reckoning of the fiscal consequences of the various promises that it has made under Mr. Ozawa’s leadership. This process will commence in full this fall and must be completed in substance by the end of the calendar year. Moreover, the ruling coalition must schedule possibly months of intensive negotiations with the opposition even if, or particularly if, it intends to exercise the HR supermajority override in the end. There will undoubtedly be major surprises as the process unfolds. The road money is a significant part of this process, but just that: only a part.
As a final note, it is important to remember that at least some of this can indeed happen under a different Prime Minister. Last Wednesday’s Diet faceoff with Ichirō Ozawa has been widely panned by the media and even some serious LDP politicians such as Tarō Asō and Kaoru Yosano, two men the media are playing up as pretenders to the Prime Minister’s seat. Although I only read an excerpted summary in the Sankei, in what I read, Mr. Fukuda came across as oddly querulous and plaintive, like an aging lover spurned in a 19th Century romance novel (or so one imagines). More seriously, this morning on Sunday Project, Mr. Yasano leveled strong criticism at the Prime Minister’s Office. Although it was an implicit indictment of Nobutaka Machimura, the Chief Cabinet Secretary who replaced him and perhaps the Administrative Deputy Chief Cabinet Secretary as well, the hint of leadership failure at an even higher level was also hard to miss.
I do not yet think that a premature departure is more likely than not. A Prime Minister has substantial staying power if he is willing to use the full arsenal of weapons available to him, Remember, Prime Minister Abe stayed on even after the disastrous 2007 HC election defeat and only left when his health finally failed him. Still, compared to fiscal reform that requires a consumption tax hike, the gasoline tax surcharge is almost a gimmie. Prime Minister Fukuda will not be able to get away with forcing his will on a divided coalition the way he did with his proposal on the road money. He will need every bit of help from the reformists and fiscal hawks to survive. He will also have to draw in likeminded Diet members from the opposition, mainly in the DPJ. One thing for sure: the tax package will make or break the Fukuda administration.
Wednesday, April 09, 2008
Ozawa Gets His Way on BOJ Deputy Governor
The House of Councilors voted to promote newly-appointed BOJ Deputy Governor and Acting Governor Masaaki Shirakawa to full-time Governor. However, it vetoed 121 to 115 the appointment of ex-MOF Vice Minister for International Affairs Hiroshi Watanabe, the Fukuda administration’s choice to replace him as Deputy Governor. From the DPJ, Hideo Watanabe*, Yasuhiro Ōe* and Masashi Fujiwara voted in favor of the latter appointment, while Tadashi Inuzuka**, Naoki Kazama, Yoshitake Kimata, Mitsuru Sakurai and Takashi Morita abstained. The Councilors who voted in favor will be duly punished. The abstainers will be excused, says Yukio Hatoyama, since “given the circumstances, it was inevitable.” Mr. Kimata, you may remember***, was already under a one-month suspension for voting in favor of promoting the ill-fated Toshirō Mutō. Although the Japanese Criminal Code does not have a three-strikes clause, two-time offenders can receive heavier sentences.
The DPJ showed remarkable discipline, “given the circumstances”****. All credible news reports contend that majorities of both the party leadership and the rank-and-file in the DPJ supported Mr. Watanabe’s candidacy, but Ichirō Ozawa shot it down. The irony is that it’s evidently payback for opposing Mr. Mutō’s original candidacy, which Mr. Ozawa had been inclined to support. I know that he’s cutting off the nose to spite the face － editorial writers and talking heads are going to have a minor field day over this － but it is vintage Ozawa. Sure, it’s a public relations setback, but he could have split the party over this, do the kind of nasty he has not hesitated to do from his LDP days. His colleagues knew this, so they had no choice but to go along. Besides, they have plenty of battle-scars from the BOJ appointment votes, so one more wouldn’t put them over the PR pain threshold.
There appears to be a fairly common perception, particularly among Mr. Fukuda’s LDP enemies, that the Prime Minister has botched the entire BPJ appointment process. I don’t know about that; the DPJ is worse off than the Fukuda administration, and that would not have happened if Mr. Fukuda had tapped Mr. Shirakawa (or Mr. Watanabe for that matter) in the first place. Remember, you only have to make sure that you run faster than the other guy to escape from the marauding bear. Still, it makes good copy for the media (snap election, please) and trope for pretenders (can’t fight election under that wuss), so expect to keep hearing it.
And with that, attention turns back to the gasoline tax surcharge. That’s Mr. Fukuda’s real touchstone. Is he as half as crazy as Mr. Ozawa － willing and able to wield his own nuclear weapon? That Prime Minister’s prerogative, together with normal party discipline, should see him through. Which, when you think about it, is a better-case long-term scenario for the DPJ, if not for someone who shares the very mortal Mr. Ozawa’s sense of urgency.
BTW, I’m beginning to feel a little sorry for Mr. Hatoyama, who has to keep going out there as Mr. Ozawa’s Deputy and explain things to the media. (At least one mainstream news report puts Mr. Watanabe’s name on a list of five acceptable candidates that Mr. Hatoyama gave to the LDP). How many more times does he have to first talk out of one side of his mouth, then another, before he yells, I’m mad as hell and I’m not going to take this any more?
* Mssrs. Watanabe and Ōe first came to the blog’s notice in January, when they joined mostly roadies and fellow travelers from the LDP at that road money retention meet-and-greet for prefectural assemblymen.
** Mr. Inuzuka claims that the voting machine must have malfunctioned, since he voted against both appointments.
ADD April 10: Today’s hardcopy Yomiuri has kindly provided a more complete list of the justifications/excuses, which I record here for future reference:
Voting in favor:
Hideo Watanabe: Making the decision with a view to the political game in disregard of the opinions in the organization will not earn the trust of the public.
Yasuhiro Ōe: The party was leaning towards agreeing [to the appointments]. We should act in a way befitting the largest party in the House of Councilors.
Masashi Fujiwara: The button I pushed says it all.
Abstaining:
Tadashi Inuzuka: (His office stated that he said he pushed the “no” button.)
Naoki Kazama: I mistakenly pushed the wrong button.
Absent:
Mitsuru Sakurai: It’s not right that we decided to oppose the appointment when more than 70% of the members of the [DPJ Public Finance and Financial Sector] Departmental Committee supported it. If people think that we’ll oppose everything, it will become difficult to seize power.
Yoshitake Kimata: (His office stated that he had returned to his home district and could not arrive in time for the vote.
Four DPJ members skipped the House of Representatives vote:
Masayo Tanabe: (Her office stated that she had to campaign for the DPJ candidate in the HR Yamaguchi 2nd District by-election.)
Hiroko Nakano: (Her office gave an injury as the reason for her absence.)
Hideo Hiraoka: (His office stated that he had to prepare to stand as the DPJ candidate in the HR Yamaguchi 2nd District by-election.)
Motohisa Furukawa: At one point, we had indicated to the government that Mr. Watanabe would be acceptable as Governor.
*** Posted, very briefly, here.
**** Showing less discipline but a rather keen sense of gallows humor, Kenji Yamaoka, the DPJ Diet Affairs Chairman left a message on Mr. Watanabe’s phone telling him that he wouldn’t have the votes to be affirmed. He claims that he called to soften the blow.
The DPJ showed remarkable discipline, “given the circumstances”****. All credible news reports contend that majorities of both the party leadership and the rank-and-file in the DPJ supported Mr. Watanabe’s candidacy, but Ichirō Ozawa shot it down. The irony is that it’s evidently payback for opposing Mr. Mutō’s original candidacy, which Mr. Ozawa had been inclined to support. I know that he’s cutting off the nose to spite the face － editorial writers and talking heads are going to have a minor field day over this － but it is vintage Ozawa. Sure, it’s a public relations setback, but he could have split the party over this, do the kind of nasty he has not hesitated to do from his LDP days. His colleagues knew this, so they had no choice but to go along. Besides, they have plenty of battle-scars from the BOJ appointment votes, so one more wouldn’t put them over the PR pain threshold.
There appears to be a fairly common perception, particularly among Mr. Fukuda’s LDP enemies, that the Prime Minister has botched the entire BPJ appointment process. I don’t know about that; the DPJ is worse off than the Fukuda administration, and that would not have happened if Mr. Fukuda had tapped Mr. Shirakawa (or Mr. Watanabe for that matter) in the first place. Remember, you only have to make sure that you run faster than the other guy to escape from the marauding bear. Still, it makes good copy for the media (snap election, please) and trope for pretenders (can’t fight election under that wuss), so expect to keep hearing it.
And with that, attention turns back to the gasoline tax surcharge. That’s Mr. Fukuda’s real touchstone. Is he as half as crazy as Mr. Ozawa － willing and able to wield his own nuclear weapon? That Prime Minister’s prerogative, together with normal party discipline, should see him through. Which, when you think about it, is a better-case long-term scenario for the DPJ, if not for someone who shares the very mortal Mr. Ozawa’s sense of urgency.
BTW, I’m beginning to feel a little sorry for Mr. Hatoyama, who has to keep going out there as Mr. Ozawa’s Deputy and explain things to the media. (At least one mainstream news report puts Mr. Watanabe’s name on a list of five acceptable candidates that Mr. Hatoyama gave to the LDP). How many more times does he have to first talk out of one side of his mouth, then another, before he yells, I’m mad as hell and I’m not going to take this any more?
* Mssrs. Watanabe and Ōe first came to the blog’s notice in January, when they joined mostly roadies and fellow travelers from the LDP at that road money retention meet-and-greet for prefectural assemblymen.
** Mr. Inuzuka claims that the voting machine must have malfunctioned, since he voted against both appointments.
ADD April 10: Today’s hardcopy Yomiuri has kindly provided a more complete list of the justifications/excuses, which I record here for future reference:
Voting in favor:
Hideo Watanabe: Making the decision with a view to the political game in disregard of the opinions in the organization will not earn the trust of the public.
Yasuhiro Ōe: The party was leaning towards agreeing [to the appointments]. We should act in a way befitting the largest party in the House of Councilors.
Masashi Fujiwara: The button I pushed says it all.
Abstaining:
Tadashi Inuzuka: (His office stated that he said he pushed the “no” button.)
Naoki Kazama: I mistakenly pushed the wrong button.
Absent:
Mitsuru Sakurai: It’s not right that we decided to oppose the appointment when more than 70% of the members of the [DPJ Public Finance and Financial Sector] Departmental Committee supported it. If people think that we’ll oppose everything, it will become difficult to seize power.
Yoshitake Kimata: (His office stated that he had returned to his home district and could not arrive in time for the vote.
Four DPJ members skipped the House of Representatives vote:
Masayo Tanabe: (Her office stated that she had to campaign for the DPJ candidate in the HR Yamaguchi 2nd District by-election.)
Hiroko Nakano: (Her office gave an injury as the reason for her absence.)
Hideo Hiraoka: (His office stated that he had to prepare to stand as the DPJ candidate in the HR Yamaguchi 2nd District by-election.)
Motohisa Furukawa: At one point, we had indicated to the government that Mr. Watanabe would be acceptable as Governor.
*** Posted, very briefly, here.
**** Showing less discipline but a rather keen sense of gallows humor, Kenji Yamaoka, the DPJ Diet Affairs Chairman left a message on Mr. Watanabe’s phone telling him that he wouldn’t have the votes to be affirmed. He claims that he called to soften the blow.
Friday, April 04, 2008
For Tarō Kōno and His Cohorts, It’s Not Just about the Money
Tarō Kōnō, the somewhat-outlier Lower House member for the LDP (it’s easy to get away with a little eccentricity when you are a multi-heritage seat-holder), supports the Prime Minister’s gasoline tax-and-spending proposal, and according to this Mainichi report, is one of the ringleaders of the new “Group to Support the Fukuda Proposal and Achieve the Conversion of Road-Specific Funds to General Funds 「福田提案を支持し、道路特定財源の一般財源化を実現する会」”, a 55-member group of relatively junior LDP and New Kōmeitō Diet members that held its first meeting yesterday (April 3). In fact, he supports it so strongly, he actually opposes it. Well, sort of. For Mr. Kōno intends to vote against a legislative bill that features a ten-year extension of a provision in the special measures act that regulates the use of the gasoline taxes revenues, rightly pointing out that you don’t need a ten-year extension if you intend to eliminate the road-specific funds next year. The bill passed the Lower House and sent to the Upper House on March 13. The 60-day magic deadline falls on May 12. First, let’s look at the immediate consequences.
There are three possibilities. The first scenario is the simplest one. The Upper House rejects the bill or does not vote by May 12, and the Lower House ultimately passes the bill unaltered in a super majority override. There will be some political fallout, and the battle will recommence later in the year. In any case, the ruling coalition must come up with an amendment during the is fiscal year in order to keep Prime Minister Fukuda’s promise to end the earmark in FY 2009.
The second scenario also follows Upper House rejection/neglect, but enough coalition members abstain (possibly, just possibly, vote against it) that the bill fails to pass. It’s highly unlikely, but not impossible. If every member of the Lower House not a member of the coalition except the Chairman votes against the bill in the revote (improbable, but let’s keep it really simple) and the Chairman abstains, thenonly 16 47 (Big mistake. This post should be rewritten to reflect the much lower probability of this happening, but you see my point.) coalition members need abstain for the supermajority override to fail. That’s not an inconceivable figure, but remember, there are independents and rogue DPJ members who could very well go the other way (say, the six Lower House members from New People’s Party, whose leaders you must remember were kicked out for opposing the Post Office privatization bill, the cornerstone of the Koizumi reforms), so the actual number of abstentions needed to kill the bill should be higher. Conversely, if (in the highly unlikely event that) some of Mr. Kōnō and friends actually vote against it, the coalition will need more votes in favor that in the case of abstentions only. The immediate practical consequences of a vote-down are surprisingly minor. The dedication of a minimum amount of the gasoline tax money (actually most of it, but that’s the way the provision is constructed) to the road development and maintenance fund will end this fiscal year (FY2008), one year earlier than the Fukuda Proposal. But this should not affect the relevant budgets, which came into effect at the beginning of this fiscal year, since there are no legal limits to the amount of gasoline money that you can put into the road development and maintenance budget. Politically, though, it will be a source of great embarrassment to the Fukuda administration, and seriously damage its prospects for long-term survival. But the main event is the surcharge extension, whose 60-day waiting period expires on April 29, and the coalition should be able to stick together through that. That means that the Fukuda administration will survive in any case through the summer.
The third and most unlikely scenario － let’s say about as unlikely as a giant meteor hitting the Diet building while both Houses are in meeting in plenary － is that the coalition and the opposition agree to amend the bill to limit the extension to one year. The DPJ will not make any such concessions, though, unless the LDP agrees to drop the surcharge immediately. The two measures － the surcharge and the minimum earmark － not linked legally, but are indivisible in the political minds of the DPJ leadership. It wants to force the coalition to exercise the supermajority as often as possible on this issue.
The most interesting aspect of the new group, though, as Tobias Harris points out here, is its generational implications. For Mr. Kōnō and the other LDP leaders of the group, Yasufumi Tanahashi and Kenichi Mizuno, are a relatively youthful 45, 45 and 41, respectively. Yet because of the early start they got in politics (two of them are heirloom Diet members and the other is a former, second-generation bureaucrat), they are already into their fourth term as Lower House members. (One of them actually served as a Cabinet member in the Koizumi administration.) The Seisaku Shinjinrui, headed by men such as Nobuteru Ishihara and Takahisa Shiozaki, first made their mark in the late 1990s on the occasion of the financial Big Bang, and continued to play a significant role in the Koizumi reforms. However, they all are now well into their fifties, and the political clock in the LDP has gone into reverse. Shinzō Abe, the only Prime Minister of their generation, has been followed after his short, unhappy regime by that the Mr. Fukuda, a septuagenarian, who in turn is being stalked by the 67-year old Tarō Asō. All of the major Cabinet posts are going to men in their sixties. Junichirō Koizumi, who could reclaim the Prime Minister’s chair any time he wants, is 66. And pulling strings behind (and sometimes in front of) the backdrop is former Prime Minister Yoshirō Mori, who… But you see my point.
As it happens, the articulate trio, as reform-minded Koizumi disciples, have a measure of influence over the Koizumi Kids, who must be beside themselves with worry over the prospects for their next election, which they must face no later than September next year. They surely must have ambitions of leapfrogging their immediate elders, the former Seisaku Shinjinrui (my generation!), whose careers appear to be stalling for the moment**. Holding up the reform flag anew and calling on their colleagues to rally around it is a good way to make some of that Koizumi magic rub off on them as well.
* Incidentally, Tobias’s essay is very well argued, although I do not fully agree with his analysis. The current clash “on a matter of principle” at bottom, like on all the other issues that he lists, currently boils down to a conflict grounded on political convenience. The public is aware of this, which is why the public is disillusioned not only with the LDP and the Fukuda administration, but also the DPJ.
** Note that Mr. Ishihara, who had thrived as an independent, succumbed to the siren call of the habatsu and recently joined the Yamazaki faction. This has moved him forward as a Prime Minister candidate, but also brands him as a conventional politician.
There are three possibilities. The first scenario is the simplest one. The Upper House rejects the bill or does not vote by May 12, and the Lower House ultimately passes the bill unaltered in a super majority override. There will be some political fallout, and the battle will recommence later in the year. In any case, the ruling coalition must come up with an amendment during the is fiscal year in order to keep Prime Minister Fukuda’s promise to end the earmark in FY 2009.
The second scenario also follows Upper House rejection/neglect, but enough coalition members abstain (possibly, just possibly, vote against it) that the bill fails to pass. It’s highly unlikely, but not impossible. If every member of the Lower House not a member of the coalition except the Chairman votes against the bill in the revote (improbable, but let’s keep it really simple) and the Chairman abstains, then
The third and most unlikely scenario － let’s say about as unlikely as a giant meteor hitting the Diet building while both Houses are in meeting in plenary － is that the coalition and the opposition agree to amend the bill to limit the extension to one year. The DPJ will not make any such concessions, though, unless the LDP agrees to drop the surcharge immediately. The two measures － the surcharge and the minimum earmark － not linked legally, but are indivisible in the political minds of the DPJ leadership. It wants to force the coalition to exercise the supermajority as often as possible on this issue.
The most interesting aspect of the new group, though, as Tobias Harris points out here, is its generational implications. For Mr. Kōnō and the other LDP leaders of the group, Yasufumi Tanahashi and Kenichi Mizuno, are a relatively youthful 45, 45 and 41, respectively. Yet because of the early start they got in politics (two of them are heirloom Diet members and the other is a former, second-generation bureaucrat), they are already into their fourth term as Lower House members. (One of them actually served as a Cabinet member in the Koizumi administration.) The Seisaku Shinjinrui, headed by men such as Nobuteru Ishihara and Takahisa Shiozaki, first made their mark in the late 1990s on the occasion of the financial Big Bang, and continued to play a significant role in the Koizumi reforms. However, they all are now well into their fifties, and the political clock in the LDP has gone into reverse. Shinzō Abe, the only Prime Minister of their generation, has been followed after his short, unhappy regime by that the Mr. Fukuda, a septuagenarian, who in turn is being stalked by the 67-year old Tarō Asō. All of the major Cabinet posts are going to men in their sixties. Junichirō Koizumi, who could reclaim the Prime Minister’s chair any time he wants, is 66. And pulling strings behind (and sometimes in front of) the backdrop is former Prime Minister Yoshirō Mori, who… But you see my point.
As it happens, the articulate trio, as reform-minded Koizumi disciples, have a measure of influence over the Koizumi Kids, who must be beside themselves with worry over the prospects for their next election, which they must face no later than September next year. They surely must have ambitions of leapfrogging their immediate elders, the former Seisaku Shinjinrui (my generation!), whose careers appear to be stalling for the moment**. Holding up the reform flag anew and calling on their colleagues to rally around it is a good way to make some of that Koizumi magic rub off on them as well.
* Incidentally, Tobias’s essay is very well argued, although I do not fully agree with his analysis. The current clash “on a matter of principle” at bottom, like on all the other issues that he lists, currently boils down to a conflict grounded on political convenience. The public is aware of this, which is why the public is disillusioned not only with the LDP and the Fukuda administration, but also the DPJ.
** Note that Mr. Ishihara, who had thrived as an independent, succumbed to the siren call of the habatsu and recently joined the Yamazaki faction. This has moved him forward as a Prime Minister candidate, but also brands him as a conventional politician.
Thursday, April 03, 2008
Why Fewer Yomiuri Poll Responders Appreciate Surcharge Expiration... but the Real Battle Comes...
According to the Yomiuri poll, 56% of the responders said that the drop in gasoline prices due to the expiration of the surcharge was a good thing. That’s pretty high, but much lower than the 72% in the Asahi poll who said that the lower gasoline taxes were a good thing. They both ran random telephone polls, so it couldn’t have been the methodology. So was it the different terminology (Yomiuri=“gasoline prices”, Asahi=“gasoline taxes”)? Or could it have been… something else?
You be the judge; I’ll translate the questions for you.
Yomiuri
Gasoline prices will go down because the temporary rates [i.e. surcharge] for the gasoline tax and other taxes (other automobile fuels) expired, but national and local government budgets will face deficits, and there is confusion at service stations. Do you, or do you not, think that it was a good thing that gasoline prices went down?
ガソリン税などの暫定税率が期限切れしたことで、ガソリンは値下がりしますが、国と地方の予算不足が生じるほか、ガソリンスタンドでは混乱も起きています。あなたは、ガソリンが値下がりしたことを、良かったと思いますか、そうは思いませんか。
Asahi
Gasoline taxes will go down in April and beyond because the government parties and the opposition parties could not reach agreement with regard to gasoline taxes. Do you think that it is a good thing that the gasoline taxes will go down? Do you think that it is not a good thing?
ガソリン税を巡り政府・与党と野党の合意ができなかったことでガソリン税は４月以降下がることになります。ガソリン税が下がることはよいことだと思いますか。よくないことだと思いますか。
Seriously, there are other differences in the results, but broadly speaking, they convey more or less the same message, which has remained relatively constant: The Japanese electorate overwhelmingly favors the expiration of the gasoline tax surcharge and the conversion of the revenue to the general budget, but it also wants the opposition to accept Prime Minister Fukuda’s offer of consultations. The political returns for the DPJ in terms of electoral support have been meager, though there is no uptick for the Fukuda administration either.
The real battle will come when the ruling coalition finally gets serious with tax reform after the summer recess. Beginning with the 2007 Upper House election, the DPJ has basically been cutting trillion-yen checks to the public (most notably government funding for basic public pension, trillion-yen payoff to small-scale farmers, elimination of gasoline tax surcharge). If it can add up those figures and convince the public it knows how to pay for them, as well as draw down the enormous public debt overhang, it wins. It should be as simple as that. The DPJ has already exposed the existence of much government incompetence, negligence and waste, but the time has come to put together its case for a bicameral takeover.
Discrediting the status quo while waiting for the coalition to fall into yet another string of political blunders? That’s a strategy that relies too much on chance. And chances are, we’ll end up with the same-old, a weak government with a divided Diet for the next five years
You be the judge; I’ll translate the questions for you.
Yomiuri
Gasoline prices will go down because the temporary rates [i.e. surcharge] for the gasoline tax and other taxes (other automobile fuels) expired, but national and local government budgets will face deficits, and there is confusion at service stations. Do you, or do you not, think that it was a good thing that gasoline prices went down?
ガソリン税などの暫定税率が期限切れしたことで、ガソリンは値下がりしますが、国と地方の予算不足が生じるほか、ガソリンスタンドでは混乱も起きています。あなたは、ガソリンが値下がりしたことを、良かったと思いますか、そうは思いませんか。
Asahi
Gasoline taxes will go down in April and beyond because the government parties and the opposition parties could not reach agreement with regard to gasoline taxes. Do you think that it is a good thing that the gasoline taxes will go down? Do you think that it is not a good thing?
ガソリン税を巡り政府・与党と野党の合意ができなかったことでガソリン税は４月以降下がることになります。ガソリン税が下がることはよいことだと思いますか。よくないことだと思いますか。
Seriously, there are other differences in the results, but broadly speaking, they convey more or less the same message, which has remained relatively constant: The Japanese electorate overwhelmingly favors the expiration of the gasoline tax surcharge and the conversion of the revenue to the general budget, but it also wants the opposition to accept Prime Minister Fukuda’s offer of consultations. The political returns for the DPJ in terms of electoral support have been meager, though there is no uptick for the Fukuda administration either.
The real battle will come when the ruling coalition finally gets serious with tax reform after the summer recess. Beginning with the 2007 Upper House election, the DPJ has basically been cutting trillion-yen checks to the public (most notably government funding for basic public pension, trillion-yen payoff to small-scale farmers, elimination of gasoline tax surcharge). If it can add up those figures and convince the public it knows how to pay for them, as well as draw down the enormous public debt overhang, it wins. It should be as simple as that. The DPJ has already exposed the existence of much government incompetence, negligence and waste, but the time has come to put together its case for a bicameral takeover.
Discrediting the status quo while waiting for the coalition to fall into yet another string of political blunders? That’s a strategy that relies too much on chance. And chances are, we’ll end up with the same-old, a weak government with a divided Diet for the next five years
Tuesday, April 01, 2008
Coalition Leaders Line up for Prime Minister on Gasoline Taxes
In case anyone is still thinking that Yasuo Fukuda is up that creek without a paddle, yesterday (March 31), the Secretary-Generals, Policy Research Council Chairmen and Diet Committee Affairs Chairmen of the LDP and New Kōmeitō met with the Chief Cabinet Secretary and confirmed the coalition’s intent to “go into consultations with the Prime Minister’s proposal as the basis”. Bunmei Ibuki is the LDP Secretary-General who initially pointed out to the press that the proposal had not received the formal blessings of the LDP and － possibly knowingly － gave the DPJ a rather contrived excuse to say no to any negotiations before the gasoline tax surcharge expired.
Makoto Koga, the leader of the road tribe and powerful faction leader, also fell in line, stating, “(The Prime Minister’s proposal) must be received with humility. I have my own opinions, but I wish to value of the party uniting and going forward in the same direction.” Not the most enthusiastic of endorsements, butt as Head of Election Strategy Headquarters, a post he won after rejecting the General Council Chair (the least powerful of the LDP Big Three before Mr. Koga made it the Fantastic Four, the others being Secretary-General and Policy Research Council Chairman), he must also have been mindful of the difficulties of fighting the next Lower House election without a cover for resurrecting the unpopular “temporary” surcharge.
For nothing can be worse in political terms for a coalition Diet member who is not a diehard road tribalist than to go into the next general election with the gasoline tax and road development and maintenance plan back in place in their original forms. Even most roadists would appreciate the political cover they will receive from the Fukuda proposal, which actually leaves the door open for them to maintain at least some de facto control over the eventual disbursement of a substantial portion, if not all, of the revenue (which, incidentally, is why pressure from and shared oversight by an engaged opposition is vital). After all, they must have other, less-monied but quite numerous constituencies who will not fully appreciate the concerns of construction firms and their dependents.
Even those who are dead set against transferring a single yen of gasoline tax money to the general budget, let alone returning the money to car owners by giving up a single basis point on the surcharge (something, to be fair to the DPJ, that Mr. Fukuda has not said explicitly that he is willing to do), will think twice before defying the Prime Minister when push comes to shove, when they recall what happened to Lower House LDP Members who voted against Prime Minister Koizumi’s Post Office privatization plans. Lest other LDP members think similar punishment too harsh and side with rebellious forces, Mr. Fukuda, as Prime Minister, retains the nuclear option of dissolving the Lower House and calling a snap election.
It also helps that Mr. Fukuda has the unswerving support of the Machimura faction, the largest and most successful faction in the entire LDP. This large core support helps in a crisis. It is instructive that Toshiki Kaifu, the Prime Minister who resigned instead of making good on his threat to call a snap election, had very little help in this respect, whereas Shinzō Abe, also of the Machimura faction, managed to stay on against the wishes of many coalition members and most of the public and the media after the 2007 Upper House election disaster had validated his dismal approval figures.
In short, Mr. Fukuda has maintained control over his party on this issue until the next Lower House election.
Now, I’ve believed for some time that the road that Mr. Fukuda took was the only viable option for the Prime Minister and the ruling coalition, so I do feel like I’m having the vicarious pleasure of seeing him recapture the proverbial giraffe. But, Will it actually work?, you may ask. Well, if I knew, I would be a rich man, wuoldn’t I, for it all depends on what happens between now and the election, and how Mr. Fukuda plays the game. So with that copout, I lay my virtual pen to rest.
For today, that is; it’s a small giraffe Mr.Fukuda’s caught himself, and even that takes a lot more effort to kill.
Makoto Koga, the leader of the road tribe and powerful faction leader, also fell in line, stating, “(The Prime Minister’s proposal) must be received with humility. I have my own opinions, but I wish to value of the party uniting and going forward in the same direction.” Not the most enthusiastic of endorsements, butt as Head of Election Strategy Headquarters, a post he won after rejecting the General Council Chair (the least powerful of the LDP Big Three before Mr. Koga made it the Fantastic Four, the others being Secretary-General and Policy Research Council Chairman), he must also have been mindful of the difficulties of fighting the next Lower House election without a cover for resurrecting the unpopular “temporary” surcharge.
For nothing can be worse in political terms for a coalition Diet member who is not a diehard road tribalist than to go into the next general election with the gasoline tax and road development and maintenance plan back in place in their original forms. Even most roadists would appreciate the political cover they will receive from the Fukuda proposal, which actually leaves the door open for them to maintain at least some de facto control over the eventual disbursement of a substantial portion, if not all, of the revenue (which, incidentally, is why pressure from and shared oversight by an engaged opposition is vital). After all, they must have other, less-monied but quite numerous constituencies who will not fully appreciate the concerns of construction firms and their dependents.
Even those who are dead set against transferring a single yen of gasoline tax money to the general budget, let alone returning the money to car owners by giving up a single basis point on the surcharge (something, to be fair to the DPJ, that Mr. Fukuda has not said explicitly that he is willing to do), will think twice before defying the Prime Minister when push comes to shove, when they recall what happened to Lower House LDP Members who voted against Prime Minister Koizumi’s Post Office privatization plans. Lest other LDP members think similar punishment too harsh and side with rebellious forces, Mr. Fukuda, as Prime Minister, retains the nuclear option of dissolving the Lower House and calling a snap election.
It also helps that Mr. Fukuda has the unswerving support of the Machimura faction, the largest and most successful faction in the entire LDP. This large core support helps in a crisis. It is instructive that Toshiki Kaifu, the Prime Minister who resigned instead of making good on his threat to call a snap election, had very little help in this respect, whereas Shinzō Abe, also of the Machimura faction, managed to stay on against the wishes of many coalition members and most of the public and the media after the 2007 Upper House election disaster had validated his dismal approval figures.
In short, Mr. Fukuda has maintained control over his party on this issue until the next Lower House election.
Now, I’ve believed for some time that the road that Mr. Fukuda took was the only viable option for the Prime Minister and the ruling coalition, so I do feel like I’m having the vicarious pleasure of seeing him recapture the proverbial giraffe. But, Will it actually work?, you may ask. Well, if I knew, I would be a rich man, wuoldn’t I, for it all depends on what happens between now and the election, and how Mr. Fukuda plays the game. So with that copout, I lay my virtual pen to rest.
For today, that is; it’s a small giraffe Mr.Fukuda’s caught himself, and even that takes a lot more effort to kill.
Monday, March 31, 2008
What Does It Mean When the Media Urges the DPJ to Come to Terms on Gasoline Taxes?
Over the weekend, all the major dailies wanted the DPJ to take up the latest version of the Fukuda offer. Look at the op-ed titles:
Asahi*
March 28
Japanese The Prime Minister’s Decision － It’s [DPJ] President Ozawa’s Turn to Respond (首相の決断―小沢代表が応える番だ)
English Debate over Road Taxes
March 29
Japanese To the DPJ － Make the “Fukuda Proposal” Bear Fruit 民主党へ―「福田提案」を実らせよ
English Proposal on Road Taxes
Mainichi
March 29
JapaneseDPJ － Return to the Starting Point of Reform 民主党 改革とは何かの原点に戻れ
March 30
March Putting Road Money into General funds － Don’t Lose a Great Opportunity for Budget Reform 道路財源一般化 予算改革の絶好機を逃すな
Yomiuri
March 28
JapaneseThe Prime Minister’s Amended Proposal － The DPJ Must Also Make a Bold Compromise－ 首相修正提案 民主党も大胆に妥協せよ（3月28日付・読売社説）
English DPJ must make concessions in tax row
March 29
Japanese Gasoline Taxes － Strive Till the End to Avoid Confusion ガソリン税 最後まで混乱回避に努めよ
Sankei
March 28 The Prime Minister’s Emergency Press Briefing － The DPJ Must Accept Policy Dialogue 首相緊急会見 民主は政策協議に応じよ
March 29 Budget Passes － Avoid Confusion with Regard to on Gasoline Too 予算成立 ガソリンでも混乱避けよ
But, you may ask, Does anyone read the editorials?. Well, I did this time, if only to write this post. But that does not mean that editorials are meaningless. In a land where newspaper journalists stay in one major print-and-TV media family for their entire working lives (barring corporate catastrophes, one of which created the perfect marriage between Sankei and Yoshihisa Komori), the editorial writers are merely a group of the senior, lifetime in-house reporters who have passed the first important up-out-out-to-the-boondocks test in their career paths. What this means is that the views expressed in the editorials are mirrored in the reporting of the actual news, since both sides are the manifestations of the singular, unchanging corporate anima, with no WSJ-like divide between the two. Thus, the ideological and policy preferences of any newspaper (and choice of professional baseball teams in the case of Yomiuri) are incessantly drummed into the minds of its faithful subscribers, channeling, honing and amplifying their responses to issues that may not otherwise invoke visceral reactions.
I may be exaggerating a little, and surely speculating a lot. I cannot read the minds of my fellow Japanese, and do not know firsthand their newspaper reading habits beyond those of my immediate family. Moreover, I do not watch much Japanese TV, so I am relatively ignorant of the tone and content of what appear to be the ideologically less constricting TV news programs and the more popular general-purpose wide shows. Still, when all the major dailies from the Asahi on the left to the Sankei on the right agree on an acutely divisive political issue, that is bound to influence the public’s take on the relative merits of the political position that the two sides have chosen. It surely must also, in this instance, help the Prime Minister keep the road-tribe and other dissidents within the coalition in line as far as his proposal to consign the gasoline tax money to the general-purpose funds is concerned.
The DPJ deserves huge credit for making full use of the opposition’s Upper House majority and the public’s support, thereby registering a major political victory and potentially substantial change in the future use of the gasoline tax revenue. Remember, a Prime Minister no less than Junichirō Koizumi earned a big fat incomplete on this one. However, by refusing to take what was offered and continue what could be very public negotiations for the remainder of its demands (elimination of the surcharge rate, and other reforms), it threw away the political benefits of its achievements and instead exposed its actions to accusations of playing politics with the public’s wellbeing. Yet again, the DPJ has managed to display its dismaying knack for adding up to less than the sum of its parts.
Prime Minister Fukuda, to be sure, is not out of the woods. The surcharge is unpopular with the general public and should remain so, yet he has no choice but to have the coalition exercise its Lower House supermajority to pass the surcharge extension as is come April 29. Moreover, there is a widely held sense of waste, if not outright corruption, in the use of the road money, but he will face fierce opposition from powerful vested interests, including within his own party, that seek to maintain the status quo. However, if he manages to make a show of his resolve with regard to the revote while maintaining the doors open to negotiations with the opposition; and, through autumn and beyond, enforce his proposal on the coalition and actuate visible changes in the size, content and execution of the road plan even as the DPJ remains outside the actual reform process, then he should be able to maintain and enhance public support for his administration, even in the face of continued displeasure of the public with regard to expensive automobile fuels.
This will all be idle speculation if the economy takes a visible turn for the worse. Then, even the DPJ’s latest justification for dropping the gasoline taxes － it’s an anti-recession measure － will gain credibility. But that is a chance that Mr. Fukuda will take.
* FYI the Asahi takes the judgmental elements out of the editorial titles when it translates them. It apparently does this to all its editorial translations, not just these two.
Asahi*
March 28
Japanese The Prime Minister’s Decision － It’s [DPJ] President Ozawa’s Turn to Respond (首相の決断―小沢代表が応える番だ)
English Debate over Road Taxes
March 29
Japanese To the DPJ － Make the “Fukuda Proposal” Bear Fruit 民主党へ―「福田提案」を実らせよ
English Proposal on Road Taxes
Mainichi
March 29
JapaneseDPJ － Return to the Starting Point of Reform 民主党 改革とは何かの原点に戻れ
March 30
March Putting Road Money into General funds － Don’t Lose a Great Opportunity for Budget Reform 道路財源一般化 予算改革の絶好機を逃すな
Yomiuri
March 28
JapaneseThe Prime Minister’s Amended Proposal － The DPJ Must Also Make a Bold Compromise－ 首相修正提案 民主党も大胆に妥協せよ（3月28日付・読売社説）
English DPJ must make concessions in tax row
March 29
Japanese Gasoline Taxes － Strive Till the End to Avoid Confusion ガソリン税 最後まで混乱回避に努めよ
Sankei
March 28 The Prime Minister’s Emergency Press Briefing － The DPJ Must Accept Policy Dialogue 首相緊急会見 民主は政策協議に応じよ
March 29 Budget Passes － Avoid Confusion with Regard to on Gasoline Too 予算成立 ガソリンでも混乱避けよ
But, you may ask, Does anyone read the editorials?. Well, I did this time, if only to write this post. But that does not mean that editorials are meaningless. In a land where newspaper journalists stay in one major print-and-TV media family for their entire working lives (barring corporate catastrophes, one of which created the perfect marriage between Sankei and Yoshihisa Komori), the editorial writers are merely a group of the senior, lifetime in-house reporters who have passed the first important up-out-out-to-the-boondocks test in their career paths. What this means is that the views expressed in the editorials are mirrored in the reporting of the actual news, since both sides are the manifestations of the singular, unchanging corporate anima, with no WSJ-like divide between the two. Thus, the ideological and policy preferences of any newspaper (and choice of professional baseball teams in the case of Yomiuri) are incessantly drummed into the minds of its faithful subscribers, channeling, honing and amplifying their responses to issues that may not otherwise invoke visceral reactions.
I may be exaggerating a little, and surely speculating a lot. I cannot read the minds of my fellow Japanese, and do not know firsthand their newspaper reading habits beyond those of my immediate family. Moreover, I do not watch much Japanese TV, so I am relatively ignorant of the tone and content of what appear to be the ideologically less constricting TV news programs and the more popular general-purpose wide shows. Still, when all the major dailies from the Asahi on the left to the Sankei on the right agree on an acutely divisive political issue, that is bound to influence the public’s take on the relative merits of the political position that the two sides have chosen. It surely must also, in this instance, help the Prime Minister keep the road-tribe and other dissidents within the coalition in line as far as his proposal to consign the gasoline tax money to the general-purpose funds is concerned.
The DPJ deserves huge credit for making full use of the opposition’s Upper House majority and the public’s support, thereby registering a major political victory and potentially substantial change in the future use of the gasoline tax revenue. Remember, a Prime Minister no less than Junichirō Koizumi earned a big fat incomplete on this one. However, by refusing to take what was offered and continue what could be very public negotiations for the remainder of its demands (elimination of the surcharge rate, and other reforms), it threw away the political benefits of its achievements and instead exposed its actions to accusations of playing politics with the public’s wellbeing. Yet again, the DPJ has managed to display its dismaying knack for adding up to less than the sum of its parts.
Prime Minister Fukuda, to be sure, is not out of the woods. The surcharge is unpopular with the general public and should remain so, yet he has no choice but to have the coalition exercise its Lower House supermajority to pass the surcharge extension as is come April 29. Moreover, there is a widely held sense of waste, if not outright corruption, in the use of the road money, but he will face fierce opposition from powerful vested interests, including within his own party, that seek to maintain the status quo. However, if he manages to make a show of his resolve with regard to the revote while maintaining the doors open to negotiations with the opposition; and, through autumn and beyond, enforce his proposal on the coalition and actuate visible changes in the size, content and execution of the road plan even as the DPJ remains outside the actual reform process, then he should be able to maintain and enhance public support for his administration, even in the face of continued displeasure of the public with regard to expensive automobile fuels.
This will all be idle speculation if the economy takes a visible turn for the worse. Then, even the DPJ’s latest justification for dropping the gasoline taxes － it’s an anti-recession measure － will gain credibility. But that is a chance that Mr. Fukuda will take.
* FYI the Asahi takes the judgmental elements out of the editorial titles when it translates them. It apparently does this to all its editorial translations, not just these two.
Friday, March 28, 2008
Isolation Play Called for Gasoline Taxes; Watch Tabloids and Weeklies Come Out
The LDP road tribe and its fellow travelers are expressing dissatisfaction with Prime Minister Fukuda’s definitive package. I suspect that it’s mostly show; they have their own rafters to play to. Mr. Fukuda’s initial bid keeps the surcharge intact for the time being, and money for public works is officially supposed to continue shrinking anyway. But that doesn’t mean that there won’t be a lot of resistance over the summer, as various interests, vested and non-, line up for the autumn battle over tax reform. Here, Mr. Fukuda will not be without formidable LDP allies, not least the ever-popular ex-Prime Minister Koizumi and his loyal minions (and the ever-present faction head and former Prime Minister himself Yoshirō Mori).
Not so, of course, the tabloids and the non-newspaper general-purpose weeklies. For them, it’s always been trip it if it moves, shove it if it doesn’t. In fact, the tabloids have been having a field day with stories about the imminent demise of the Fukuda administration, and this trope will gain momentum in the coming weeks. Do not be overly scornful of the muckraking horde; they went after Prime Minister Abe like mad, and you know what happened to him. On the other hand, they relentlessly hounded Prime Minister Koizumi as well, with notably less success. For my penny’s worth, barring unforeseen circumstances, it’s up to Mr. Fukuda and his willingness to threaten his coalition colleagues with the dreaded Lower House nuclear option. (Will he or won’t he risk a snap election?) Either way, the battle should heat up in earnest after the summer holidays.
ADD (March 29): I'm not predicting that Mr. Fukuda will actually have to threaten the LDP and the New Kōmeitō with a snap election to keep them in line, but I do believe that he will have to let people know that he is not afraid of using it. Do you remember Toshiki Kaifu? In 1991, as a highly popular, if somewhat ineffectual, Prime Minister, he threatened to dissolve the Lower House when the LDP did not go along with his political reform package, but lost his nerve and resigned instead.
I take this opportunity to note that the two sides have come to their senses as they agreed today to pass an emergency bill that will extend the non-gasoline special tax measures for two months in exchange for a coalition promise that it will not use it as a pretext to pretend that the original government tax bill has been rejected in the Upper House and exercise the supermajority override in the Lower House. At the end of the day, neither side is that stupid.
Not so, of course, the tabloids and the non-newspaper general-purpose weeklies. For them, it’s always been trip it if it moves, shove it if it doesn’t. In fact, the tabloids have been having a field day with stories about the imminent demise of the Fukuda administration, and this trope will gain momentum in the coming weeks. Do not be overly scornful of the muckraking horde; they went after Prime Minister Abe like mad, and you know what happened to him. On the other hand, they relentlessly hounded Prime Minister Koizumi as well, with notably less success. For my penny’s worth, barring unforeseen circumstances, it’s up to Mr. Fukuda and his willingness to threaten his coalition colleagues with the dreaded Lower House nuclear option. (Will he or won’t he risk a snap election?) Either way, the battle should heat up in earnest after the summer holidays.
ADD (March 29): I'm not predicting that Mr. Fukuda will actually have to threaten the LDP and the New Kōmeitō with a snap election to keep them in line, but I do believe that he will have to let people know that he is not afraid of using it. Do you remember Toshiki Kaifu? In 1991, as a highly popular, if somewhat ineffectual, Prime Minister, he threatened to dissolve the Lower House when the LDP did not go along with his political reform package, but lost his nerve and resigned instead.
I take this opportunity to note that the two sides have come to their senses as they agreed today to pass an emergency bill that will extend the non-gasoline special tax measures for two months in exchange for a coalition promise that it will not use it as a pretext to pretend that the original government tax bill has been rejected in the Upper House and exercise the supermajority override in the Lower House. At the end of the day, neither side is that stupid.
Sometimes I Won’t Then Again I Think I Will
Get it right, that is. Yesterday (March 27), Prime Minister Fukuda held a press conference that upped the ante on his earlier statement, with a more specific proposal on the gasoline taxes and the road construction budget and calling on the opposition to join the LDP and New Kōmeitō in joint consultations. The Sankei has posted the full text of the briefing here and here. The hardcopy Yomiuri has a convenient outline of the latest proposal, which I will once again translate, appropriately edited, for your convenience:
1. Enactment of the FY2008 revenue bills during this fiscal year (FY2007).
2. Thoroughgoing elimination of waste from expenditures related to the Road Development and Maintenance Budget.
3. Abolish the road-specific funds system on the occasion of this calendar year’s fundamental amendment of the tax system and turn the revenue over to general-purpose funds beginning in FY2009.
4. The tax rates including the temporary surcharge shall be examined, taking into consideration such matters as the international undertaking on global environmental issues and the need to develop and maintain local roads.
5. A Mid-term Road Development and Maintenance Plan shall be newly formulated for a five-year term (i.e. shortened from the current ten year plan currently being proposed by the Fukuda administration and the ruling coalition).
6. The new development and maintenance plan shall also be reflected in the implementation of the FY2008 budget. With regard to the use of the FY2008 funds, the Fukuda administration will be open to consultations if there is a realistic proposal from the DPJ.
7. Establish a consultation group between the ruling and opposition parties and consult and decide the principles for the use of the gasoline tax revenue as general-purpose funds, the Road Development and Maintenance Plan, and other matters.
On a related matter, this Yomiuri reports says that government sources have indicated that any extra taxes collected as the result of the temporary elimination of time-limited tax benefits on April 1 will be refunded. As I indicated before in my mock coalition announcement, this does not require any additional legislation, but the Yomiuri leak is an indication that the government is preparing for a supermajority override. The report says that this will be part of a Prime Minister’ s announcement on the overall issue at the end of this fiscal year, meaning presumably March 31, i.e. next Monday.
So now what? To answer that question, we must first take a look at the broader political picture.
The major political setbacks to the Fukuda administration have been the following:
1) The revelation that it could not keep the Upper House election campaign promise (made by Prime Minister Abe to be sure) to identify all the holders of the 50 million misplaced public pension accounts.
2) Its failure to come to terms with the type-C hepatitis patients who contracted the disease from blood transfusions and fibrin sealants.
3) The JMSDF Aegis destroyer Atago’s collision with a fishing vessel and the government’s faulty response.
Yet it is instructive that Yōichi Masuzoe, the outspoken Health, Welfare and Labor Minister on the watch for both 1) and 2), enjoys by far the highest approval rate (beating out even the highly popular “No one/no answer” by a healthy margin), and that Defense Minister Shigeru Ishiba, the defense otaku on the watch for 3), comes next, though he did lose a lot of goodwill as the result of the accident and its aftermath. What these two men have in common is the appearance of a sincere desire to get things done in the public interest and the ability to project it to the general public. They have a touch of that inimitable political skill that Junichirō Koizumi had in droves. In contrast, Mr. Fukuda has appeared indecisive and ineffectual, and his political style, once seen as soothing and reassuring, does nothing to dispel that impression.
However, Mr. Fukuda, or perhaps more appropriately the ruling coalition, has been saved by what appears to be a creeping public disillusionment with the DPJ’s highly and visibly politicized approach to policy issues. This had become evident with the continuing standoff over the appointment of a BOJ Governor*. The Fukuda administration may be falling in the public polls, but support for the LDP seems to have stabilized; the DPJ, if anything, is doing worse than the LDP. On this note, it is now time to go back and address the subject of Mr. Fukuda’s announcement.
Public opinion polls show that two-thirds of the Japanese voters consistently want the surcharge to be dropped, yet the DPJ has not been able to capitalize on it politically. A similar majority of voters wants the two sides to come to an accommodation, and is clearly not buying the DPJ’s hard-line approach. Mr. Fukuda has finally come out with a substantive proposal that promises to take some money away from the road tribe (though the ultimate outcome will not be clear until we see a new road plan and the actual allocation of the funds). There appears to be substantial internal opposition from the road tribe, but this will only serve to enhance his reputation, provided he can actually deliver credible reform. In any case, he has acted, and given the impression of acting decisively. This is definitely a plus for Mr. Fukuda.
So what will the future bring? First of all, I do not believe that April will be the kindest month for the DPJ. The public support for a compromise on the surcharge and the road construction earmark as well as the DPJ’s own languishing support numbers show that its shifting explanations for its stand (now claiming that dropping the surcharge is an antirecessionary measure, a plausible explanation for a temporary, say, one-year lapse) is taking its toll and deepening the impression that the DPJ is playing politics. Whatever confusion arises, which I expect to be relatively minor and therefore easily weathered, is likely to be attributed more to the DPJ than the ruling coalition. Yet the DPJ is locked into an absolute opposition to the surcharge and the road construction earmark, making it difficult to take credit for any concessions that the Fukuda administration has made or will make, or to even participate in any consultations or negotiations. The time has come to settle accounts, yet the DPJ will refuse to lay down its cards. I think that this will reflect negatively, if anything (I think that the DPJ is down, or nearly so, to its core support), on its poll figures.
The next point of tension will come in autumn, when the time comes to work on tax reform, including the gasoline tax surcharge. Prime Minister Fukuda in his announcement explicitly linked the gasoline tax rate to broader issues like global warming and difficult government finances, as well as the continued need to finance road construction and maintenance. He also raised many uses for the gasoline tax revenue in the context of abolishing the earmark. All this appears to indicate that Mr. Fukuda’s default position is to maintain the surcharge.
It is my belief that the DPJ will be unable to engage in a dialogue at that point. Once the gasoline taxes are disconnected from the road budget and the multiyear development and maintenance plan, there is no way to determine an appropriate gasoline tax rate outside of the context of the overall tax profile. But the DPJ claims that all its campaign and post-campaign promises from funding a basic public pension system solely with government revenues to dropping local government co-payments for national road construction works can be funded without raising taxes while improving the public debt position. There is no way that this position can be incorporated into a meaningful dialogue with the ruling coalition. Thus, I believe that the DPJ will stay out of the tent and hope that the Fukuda administration’s default position on the surcharge plus an early (FY2010, or even 2009?) consumption tax hike to fund the pension system will discredit the ruling coalition in the eyes of the public.
Which way will the public turn? It’s hard to guess because I believe that much will depend on how forthrightly and forcefully the Fukuda administration is able to push its case. The polls say that the majority of the voters want the surcharge to end, yet it was never an issue during the last ten years of its existence at current levels. In other words, it is an issue that only presents itself as the surcharge is set to expire, but it is being exacerbated because of the waste and corruption surrounding the expenditures. On the larger issue of the consumption tax rate, the public in the past has shown itself to be more or less reconciled to an eventual hike to narrow public financing gaps, but the distrust in government has forced the ruling coalition to take the issue off the table for the last couple of years.
So there’s a credibility issue that the Fukuda administration must address in its battle against vested interests, which in turn will be played out against the background of opinion polls, media voices, and the Greek chorus of the DPJ. But if push comes to shove with the road tribe in his attempt to carve out a significant chunk of that road money for the general budget, will he be willing to do what Mr. Koizumi did, and threaten to kick dissenters out, to call a snap election if necessary? The DPJ is sitting in the opposite corner on this one, crying for more, instead of less as in the case of Mr. Koizumi’s Post Office privatization, but the internal dynamics are the same. It is not in the nature of Mr. Fukuda to seek that kind of confrontation, but he will have no choice but to wield the Prime Minister’s nuclear option if he becomes trapped in the middle ground between vested interests and the opposition without the votes to force a supermajority override around this time, in 2009 March.
* The DPJ appears to have learned its lesson on this one and quietly allowed Satoshi Tani to be reappointed as Governor of the National Personnel Agency. The DPJ had opposed his initial appointment in 2004.
1. Enactment of the FY2008 revenue bills during this fiscal year (FY2007).
2. Thoroughgoing elimination of waste from expenditures related to the Road Development and Maintenance Budget.
3. Abolish the road-specific funds system on the occasion of this calendar year’s fundamental amendment of the tax system and turn the revenue over to general-purpose funds beginning in FY2009.
4. The tax rates including the temporary surcharge shall be examined, taking into consideration such matters as the international undertaking on global environmental issues and the need to develop and maintain local roads.
5. A Mid-term Road Development and Maintenance Plan shall be newly formulated for a five-year term (i.e. shortened from the current ten year plan currently being proposed by the Fukuda administration and the ruling coalition).
6. The new development and maintenance plan shall also be reflected in the implementation of the FY2008 budget. With regard to the use of the FY2008 funds, the Fukuda administration will be open to consultations if there is a realistic proposal from the DPJ.
7. Establish a consultation group between the ruling and opposition parties and consult and decide the principles for the use of the gasoline tax revenue as general-purpose funds, the Road Development and Maintenance Plan, and other matters.
On a related matter, this Yomiuri reports says that government sources have indicated that any extra taxes collected as the result of the temporary elimination of time-limited tax benefits on April 1 will be refunded. As I indicated before in my mock coalition announcement, this does not require any additional legislation, but the Yomiuri leak is an indication that the government is preparing for a supermajority override. The report says that this will be part of a Prime Minister’ s announcement on the overall issue at the end of this fiscal year, meaning presumably March 31, i.e. next Monday.
So now what? To answer that question, we must first take a look at the broader political picture.
The major political setbacks to the Fukuda administration have been the following:
1) The revelation that it could not keep the Upper House election campaign promise (made by Prime Minister Abe to be sure) to identify all the holders of the 50 million misplaced public pension accounts.
2) Its failure to come to terms with the type-C hepatitis patients who contracted the disease from blood transfusions and fibrin sealants.
3) The JMSDF Aegis destroyer Atago’s collision with a fishing vessel and the government’s faulty response.
Yet it is instructive that Yōichi Masuzoe, the outspoken Health, Welfare and Labor Minister on the watch for both 1) and 2), enjoys by far the highest approval rate (beating out even the highly popular “No one/no answer” by a healthy margin), and that Defense Minister Shigeru Ishiba, the defense otaku on the watch for 3), comes next, though he did lose a lot of goodwill as the result of the accident and its aftermath. What these two men have in common is the appearance of a sincere desire to get things done in the public interest and the ability to project it to the general public. They have a touch of that inimitable political skill that Junichirō Koizumi had in droves. In contrast, Mr. Fukuda has appeared indecisive and ineffectual, and his political style, once seen as soothing and reassuring, does nothing to dispel that impression.
However, Mr. Fukuda, or perhaps more appropriately the ruling coalition, has been saved by what appears to be a creeping public disillusionment with the DPJ’s highly and visibly politicized approach to policy issues. This had become evident with the continuing standoff over the appointment of a BOJ Governor*. The Fukuda administration may be falling in the public polls, but support for the LDP seems to have stabilized; the DPJ, if anything, is doing worse than the LDP. On this note, it is now time to go back and address the subject of Mr. Fukuda’s announcement.
Public opinion polls show that two-thirds of the Japanese voters consistently want the surcharge to be dropped, yet the DPJ has not been able to capitalize on it politically. A similar majority of voters wants the two sides to come to an accommodation, and is clearly not buying the DPJ’s hard-line approach. Mr. Fukuda has finally come out with a substantive proposal that promises to take some money away from the road tribe (though the ultimate outcome will not be clear until we see a new road plan and the actual allocation of the funds). There appears to be substantial internal opposition from the road tribe, but this will only serve to enhance his reputation, provided he can actually deliver credible reform. In any case, he has acted, and given the impression of acting decisively. This is definitely a plus for Mr. Fukuda.
So what will the future bring? First of all, I do not believe that April will be the kindest month for the DPJ. The public support for a compromise on the surcharge and the road construction earmark as well as the DPJ’s own languishing support numbers show that its shifting explanations for its stand (now claiming that dropping the surcharge is an antirecessionary measure, a plausible explanation for a temporary, say, one-year lapse) is taking its toll and deepening the impression that the DPJ is playing politics. Whatever confusion arises, which I expect to be relatively minor and therefore easily weathered, is likely to be attributed more to the DPJ than the ruling coalition. Yet the DPJ is locked into an absolute opposition to the surcharge and the road construction earmark, making it difficult to take credit for any concessions that the Fukuda administration has made or will make, or to even participate in any consultations or negotiations. The time has come to settle accounts, yet the DPJ will refuse to lay down its cards. I think that this will reflect negatively, if anything (I think that the DPJ is down, or nearly so, to its core support), on its poll figures.
The next point of tension will come in autumn, when the time comes to work on tax reform, including the gasoline tax surcharge. Prime Minister Fukuda in his announcement explicitly linked the gasoline tax rate to broader issues like global warming and difficult government finances, as well as the continued need to finance road construction and maintenance. He also raised many uses for the gasoline tax revenue in the context of abolishing the earmark. All this appears to indicate that Mr. Fukuda’s default position is to maintain the surcharge.
It is my belief that the DPJ will be unable to engage in a dialogue at that point. Once the gasoline taxes are disconnected from the road budget and the multiyear development and maintenance plan, there is no way to determine an appropriate gasoline tax rate outside of the context of the overall tax profile. But the DPJ claims that all its campaign and post-campaign promises from funding a basic public pension system solely with government revenues to dropping local government co-payments for national road construction works can be funded without raising taxes while improving the public debt position. There is no way that this position can be incorporated into a meaningful dialogue with the ruling coalition. Thus, I believe that the DPJ will stay out of the tent and hope that the Fukuda administration’s default position on the surcharge plus an early (FY2010, or even 2009?) consumption tax hike to fund the pension system will discredit the ruling coalition in the eyes of the public.
Which way will the public turn? It’s hard to guess because I believe that much will depend on how forthrightly and forcefully the Fukuda administration is able to push its case. The polls say that the majority of the voters want the surcharge to end, yet it was never an issue during the last ten years of its existence at current levels. In other words, it is an issue that only presents itself as the surcharge is set to expire, but it is being exacerbated because of the waste and corruption surrounding the expenditures. On the larger issue of the consumption tax rate, the public in the past has shown itself to be more or less reconciled to an eventual hike to narrow public financing gaps, but the distrust in government has forced the ruling coalition to take the issue off the table for the last couple of years.
So there’s a credibility issue that the Fukuda administration must address in its battle against vested interests, which in turn will be played out against the background of opinion polls, media voices, and the Greek chorus of the DPJ. But if push comes to shove with the road tribe in his attempt to carve out a significant chunk of that road money for the general budget, will he be willing to do what Mr. Koizumi did, and threaten to kick dissenters out, to call a snap election if necessary? The DPJ is sitting in the opposite corner on this one, crying for more, instead of less as in the case of Mr. Koizumi’s Post Office privatization, but the internal dynamics are the same. It is not in the nature of Mr. Fukuda to seek that kind of confrontation, but he will have no choice but to wield the Prime Minister’s nuclear option if he becomes trapped in the middle ground between vested interests and the opposition without the votes to force a supermajority override around this time, in 2009 March.
* The DPJ appears to have learned its lesson on this one and quietly allowed Satoshi Tani to be reappointed as Governor of the National Personnel Agency. The DPJ had opposed his initial appointment in 2004.
Saturday, March 22, 2008
Update on Gasoline Tax/Road Construction Proposal
Yesterday, a Friday, Sadakazu Tanigaki and Tetsuo Saitō, the Policy Research Council Chairmen of the LDP and New Kōmeitō respectively, dutifully consulted their peers and presented the results to the opposition parties as a six-item proposal. There are three major changes, which I show in the following translations, from Prime Minister Fukuda's original instructions. The emphasis and italics are mine, to highlight the differences:
3) The road provisioning mid-term plan shall be reviewed, including the period of the plan, on the basis of new data on demand, etc. In the event, necessary provisioning of roads shall be steadily implemented.
5) With regard to items 2 through 4, an organization for consultation between the government parties and opposition parties shall be established expediently and consultations shall be started.
6) With regard to matters on which agreement is achieved under such consultations, they shall be implemented in the budgets for fiscal year 2009 and beyond.
Item 5 merely changes the procedural point as Mr. Fukuda’s instructions to the two party chairmen are transcribed as a proposal to the opposition parties. Item 6 merely confirms my observation that any amendments will come at least a couple of years into the future. It does spell out explicitly the practical implications of item 2, which still reads, “The road-specific fiscal funds shall be reviewed with a view to its inclusion in the general-purpose fiscal funds on the occasion of the fundamental reform of the tax system.” This is, I repeat, a killer for the DPJ.
The most significant change by far is the addition in item 3. The words do not on their own have any operative meaning, but were added, according to a Yomiuri report, to alleviate the New Kōmeitō’s worries. If true, the New Kōmeitō is out-LDPing the LDP on this one. The opposition will surely highlight it as the expression of a business-as-usual mentality.
The DPJ continues to say that it won’t agree to talk unless the LDP and New Kōmeitō in effect accept its proposal in its entirety, which is a kind of procedural oxymoron. To avoid the confusion over retail pricing and purchases around the expiration of the gasoline tax surcharge, it has introduced legislation in the Upper House (echoing the two-month extension that the coalition gave up under the Chairmen’s consent decree) to refund to wholesalers the surcharges for March*.
Everything indicates that the DPJ will stand pat come 31 March, and nothing the media says is going to change this situation. I am convinced that the coalition, including the Prime Minister, knows that as well. Also, note that the coalition itself cannot alter the tax bills during this Diet session without the DPJ’s consent**. Thus, the coalition is going to be stuck with the taxes and the road construction budget as-is until the next Diet session at the earliest, and most likely until the 2009 ordinary session, which traditionally convenes in January***.
One of the consequences of this outcome of this Diet session as I foresee it is that the coalition will have to come up with a credible program on the gasoline taxes and their disposal in its entirety in place, including some down payments, before it can go to the electorate. This means that the Lower House general election will come later rather than sooner. In fact, the current Lower House members now have a good chance of serving out their full four-year terms, until 2009 September.
That, of course, does not mean that Prime Minister Fukuda necessarily will be able to do so as well.
* This could create some accounting problems on its own where the gasoline has already been sold to the retailer. I’d have to read the actual bill to be sure, but I’d really have to be at a loss of things to do for that, since the coalition will surely not let the bill pass when it comes to the Lower House.
** The coalition can, of course, alter the bill in the Upper House and send it back for a simple majority revote in the Lower House if it can get the Communists and Socialists on board. But it's easier to, say, make Australians stop killing kangaroos.
*** As a matter of pure speculation, the Prime Minister can summon a long and early ordinary session that covers the usual “extraordinary” session that is now commonly summoned in the autumn. If that happens, it will surely go down in history as the Long Diet.
3) The road provisioning mid-term plan shall be reviewed, including the period of the plan, on the basis of new data on demand, etc. In the event, necessary provisioning of roads shall be steadily implemented.
5) With regard to items 2 through 4, an organization for consultation between the government parties and opposition parties shall be established expediently and consultations shall be started.
6) With regard to matters on which agreement is achieved under such consultations, they shall be implemented in the budgets for fiscal year 2009 and beyond.
Item 5 merely changes the procedural point as Mr. Fukuda’s instructions to the two party chairmen are transcribed as a proposal to the opposition parties. Item 6 merely confirms my observation that any amendments will come at least a couple of years into the future. It does spell out explicitly the practical implications of item 2, which still reads, “The road-specific fiscal funds shall be reviewed with a view to its inclusion in the general-purpose fiscal funds on the occasion of the fundamental reform of the tax system.” This is, I repeat, a killer for the DPJ.
The most significant change by far is the addition in item 3. The words do not on their own have any operative meaning, but were added, according to a Yomiuri report, to alleviate the New Kōmeitō’s worries. If true, the New Kōmeitō is out-LDPing the LDP on this one. The opposition will surely highlight it as the expression of a business-as-usual mentality.
The DPJ continues to say that it won’t agree to talk unless the LDP and New Kōmeitō in effect accept its proposal in its entirety, which is a kind of procedural oxymoron. To avoid the confusion over retail pricing and purchases around the expiration of the gasoline tax surcharge, it has introduced legislation in the Upper House (echoing the two-month extension that the coalition gave up under the Chairmen’s consent decree) to refund to wholesalers the surcharges for March*.
Everything indicates that the DPJ will stand pat come 31 March, and nothing the media says is going to change this situation. I am convinced that the coalition, including the Prime Minister, knows that as well. Also, note that the coalition itself cannot alter the tax bills during this Diet session without the DPJ’s consent**. Thus, the coalition is going to be stuck with the taxes and the road construction budget as-is until the next Diet session at the earliest, and most likely until the 2009 ordinary session, which traditionally convenes in January***.
One of the consequences of this outcome of this Diet session as I foresee it is that the coalition will have to come up with a credible program on the gasoline taxes and their disposal in its entirety in place, including some down payments, before it can go to the electorate. This means that the Lower House general election will come later rather than sooner. In fact, the current Lower House members now have a good chance of serving out their full four-year terms, until 2009 September.
That, of course, does not mean that Prime Minister Fukuda necessarily will be able to do so as well.
* This could create some accounting problems on its own where the gasoline has already been sold to the retailer. I’d have to read the actual bill to be sure, but I’d really have to be at a loss of things to do for that, since the coalition will surely not let the bill pass when it comes to the Lower House.
** The coalition can, of course, alter the bill in the Upper House and send it back for a simple majority revote in the Lower House if it can get the Communists and Socialists on board. But it's easier to, say, make Australians stop killing kangaroos.
*** As a matter of pure speculation, the Prime Minister can summon a long and early ordinary session that covers the usual “extraordinary” session that is now commonly summoned in the autumn. If that happens, it will surely go down in history as the Long Diet.
Thursday, March 20, 2008
A Few More Words on the Fukuda Gasoline Tax/Road Construction Proposal
Note that in item 2 of his proposal that I wrote about here, Prime Minister Fukuda proposes to convert the gasoline tax into general-purpose revenue as part of “the fundamental reform of the tax system”. This is a killer for the DPJ. It’s bad enough for them that it puts the matter a couple of fiscal years into the future at the very earliest; it will also expose the weakness of its position on funding for the public pension system without a tax hike. Its current piecemeal approach makes it easier for it to avoid facing the cumulative revenue effects of its “out-promise the LDP and deal with the consequences when we win” strategy that they’ve adopted under Ichirō Ozawa. An overall review will make it difficult for the media not to notice.
In the meantime, Sankei continued pushing its interpretation － the DPJ has the ruling coalition and the Fukuda administration in particular in a panic － with this story. They run under different bylines, and I don’t see any of the other major dailies going nearly this far, so this must be a uniquely Sankei narrative. I see the immediate political situation quite differently, which has been the point of my earlier posts, here and here. Sankei, of course, is highly critical of any deviations from the dynamics that the Koizumi reform had put into place (and also supportive of Prime Minister Koizumi’s romps on the hallowed grounds of the Yasukuni Shrine), so it’s actually more aligned with the opposition on this. I think that its apprehensions － well-founded, by the way － are clouding its judgment of the overall situation.
For the record, here’s a translation of a more complete version of Mr. Fukuda’s proposal:
1) Enactment of the fiscal year 2008 revenue bills within this [2007] fiscal year.
2) The road-specific fiscal funds shall be reviewed with a view to its inclusion in the general-purpose fiscal funds on the occasion of the fundamental reform of the tax system. The fiscal funds of the local governments shall be protected on that occasion.
3) The road provisioning mid-term plan shall be reviewed, including the period of the plan, on the basis of new data on demand, etc.
4) Transparency and discipline with regard to the road budget shall be [promoted], including expenditures to public interest legal entities.
5) I request that [you] consult with the opposition parties after coordinating within the government parties on the basis of the above points.
The hardcopy Yomiuri article also carries the following estimate, surely courtesy of the Fukuda administration, in 100 million yen units, of the road-specific fiscal funds for FY 2008:
State: Volatile oil tax 27685 ( of which 13843 temporary); petroleum and [natural] gas tax 140 (0); automobile weight tax 5541 (3097); total 33366 (16940)
Local: Local road transfer tax 2998 (461); petroleum and gas transfer tax 140 (0); automobile weight transfer tax 3601 (2013); automobile acquisition tax 4024 (1309); light oil transaction tax 9914 (5281); total 20677 (9064)*.
Total: 54043 (26004)
So that’s the breakdown of the 2.6 trillion yen overall loss in revenue and the 0.9 trillion yen loss to the local governments that the ruling coalition is always talking about.
*Transfer taxes are collected as national taxes and automatically transferred to local governments.
In the meantime, Sankei continued pushing its interpretation － the DPJ has the ruling coalition and the Fukuda administration in particular in a panic － with this story. They run under different bylines, and I don’t see any of the other major dailies going nearly this far, so this must be a uniquely Sankei narrative. I see the immediate political situation quite differently, which has been the point of my earlier posts, here and here. Sankei, of course, is highly critical of any deviations from the dynamics that the Koizumi reform had put into place (and also supportive of Prime Minister Koizumi’s romps on the hallowed grounds of the Yasukuni Shrine), so it’s actually more aligned with the opposition on this. I think that its apprehensions － well-founded, by the way － are clouding its judgment of the overall situation.
For the record, here’s a translation of a more complete version of Mr. Fukuda’s proposal:
1) Enactment of the fiscal year 2008 revenue bills within this [2007] fiscal year.
2) The road-specific fiscal funds shall be reviewed with a view to its inclusion in the general-purpose fiscal funds on the occasion of the fundamental reform of the tax system. The fiscal funds of the local governments shall be protected on that occasion.
3) The road provisioning mid-term plan shall be reviewed, including the period of the plan, on the basis of new data on demand, etc.
4) Transparency and discipline with regard to the road budget shall be [promoted], including expenditures to public interest legal entities.
5) I request that [you] consult with the opposition parties after coordinating within the government parties on the basis of the above points.
The hardcopy Yomiuri article also carries the following estimate, surely courtesy of the Fukuda administration, in 100 million yen units, of the road-specific fiscal funds for FY 2008:
State: Volatile oil tax 27685 ( of which 13843 temporary); petroleum and [natural] gas tax 140 (0); automobile weight tax 5541 (3097); total 33366 (16940)
Local: Local road transfer tax 2998 (461); petroleum and gas transfer tax 140 (0); automobile weight transfer tax 3601 (2013); automobile acquisition tax 4024 (1309); light oil transaction tax 9914 (5281); total 20677 (9064)*.
Total: 54043 (26004)
So that’s the breakdown of the 2.6 trillion yen overall loss in revenue and the 0.9 trillion yen loss to the local governments that the ruling coalition is always talking about.
*Transfer taxes are collected as national taxes and automatically transferred to local governments.
Wednesday, March 19, 2008
Is the LDP-New Kōmeitō Coalition Following My Game Plan?
As expected, the DPJ said no to Kōji Tanami, the latest sacrificial lamb on the BOJ Governorship altar. There are two ways to interpret this: Prime Minister Fukuda is nuts; or, there’s a game plan. Since the first one leads nowhere unless you’re a diehard DPJ fan or an LDP member seeking to depose Mr. Fukuda, I, as an Independent, have no option but to hypothesize that there is a game plan. And if there is one, then this looks as good as any, no*?
Well, today, even while the LDP-New Kōmeitō were pushing Mr. Tanami’s doomed candidacy, the coalition got together and worked all day to hammer out a gasoline tax/road construction budget game plan. It culminated in Prime Minister Fukuda’s five-point plan “Our Thinking on the Road-Specific Fiscal Revenues:**
1) Pass tax bills during this fiscal year [before 1 April];
2) reexamine the road-specific revenue with a view to turning it into general-purpose revenue as part of the fundamental reform of the tax system;
3) Re-examine the mid-term road provisioning plan for including its [ten-year] term;
4) [Promote] transparency and discipline with regard to the road budget, including expenditures to public interest legal entities; and
5) Consult with the opposition parties after coordinating within the ruling [coalition].
If anything, they went beyond my “message”. But then, you can’t win ‘em all. Besides, something may have been lost in translation. But I digress. Luckily for the coalition, Naoto Kan, one of Ichirō Ozawa’s two deputies and once and (hoping to be) future king, rejected it even before it had been announced*.
As for Mr. Tanami, you need not shed a tear for him. He remains ensconced as the head of the Bank of International Cooperation (for which I have a special place in my heart, having come up with its English name when OECF and the Ex-Im Bank merged to form JBIC), after gaining some political brownie points for his momentary humiliation.
Speaking of “advice”, I have been reminded that “the [Japanese government] has followed [DMr. Dujarric’s] advice and recognized Kosovo.***” Well, is it my fault the LDP prefers to listen to American Japan handlers and ignore the concerns of Japanese voters like me?
FYI, Serbia recalled its ambassador to Japan in protest.
* Mr. Kan also said, “We were 99% willing to accept just about anybody.” That’s one of the faults of the DPJ leadership. They’re too honest to be really effective politicians.
** Is he finally getting the hang of it?
ADD. *** Actually, it was Robert himself that reminded me.
Well, today, even while the LDP-New Kōmeitō were pushing Mr. Tanami’s doomed candidacy, the coalition got together and worked all day to hammer out a gasoline tax/road construction budget game plan. It culminated in Prime Minister Fukuda’s five-point plan “Our Thinking on the Road-Specific Fiscal Revenues:**
1) Pass tax bills during this fiscal year [before 1 April];
2) reexamine the road-specific revenue with a view to turning it into general-purpose revenue as part of the fundamental reform of the tax system;
3) Re-examine the mid-term road provisioning plan for including its [ten-year] term;
4) [Promote] transparency and discipline with regard to the road budget, including expenditures to public interest legal entities; and
5) Consult with the opposition parties after coordinating within the ruling [coalition].
If anything, they went beyond my “message”. But then, you can’t win ‘em all. Besides, something may have been lost in translation. But I digress. Luckily for the coalition, Naoto Kan, one of Ichirō Ozawa’s two deputies and once and (hoping to be) future king, rejected it even before it had been announced*.
As for Mr. Tanami, you need not shed a tear for him. He remains ensconced as the head of the Bank of International Cooperation (for which I have a special place in my heart, having come up with its English name when OECF and the Ex-Im Bank merged to form JBIC), after gaining some political brownie points for his momentary humiliation.
Speaking of “advice”, I have been reminded that “the [Japanese government] has followed [
FYI, Serbia recalled its ambassador to Japan in protest.
* Mr. Kan also said, “We were 99% willing to accept just about anybody.” That’s one of the faults of the DPJ leadership. They’re too honest to be really effective politicians.
** Is he finally getting the hang of it?
ADD. *** Actually, it was Robert himself that reminded me.
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.
“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.
Friday, March 14, 2008
Now What Happens to the Gasoline Tax Surcharge and the Road Construction Budget? Also, Some More General Implications
With all signs on the BOJ appointments trending to an eventual someone-other-than-Mutō denouement, it’s time to turn my attention back to the gasoline taxes and the road construction budget. (It’s also time to revisit the public pension scandal as the Abe-imposed March deadline for finding the owners of the missing account approaches; but one at a time.)
As I indicated here, I now believe that the DPJ is now gearing up to speed right past the March 31 deadline and let the gasoline tax surcharge lapse. The LDP is surely going to keep sending out feelers to the DPJ leadership while stepping up its lobbying efforts (in cooperation with local government officials and special interests) aimed at the 39 DPJ Diet members (including 25 from the Upper House) who reportedly signed Yasuhiro Ōe’s petition opposing the elimination of the surcharge, and other potential dissenters among the DPJ rank-and-file. The DPJ took a net five-member hit on the BOJ Governor vote in the Upper House (two absented themselves and three abstained, the latter including the rambunctious Mr. Ōe) but none of its members actually voted in favor of Mr. Mutō. However, pressure will be much stronger － from both sides, to be sure － on the gasoline taxes. Further complicating the picture will be the internal dissent on the LDP side.
Assuming that the standoff continues into the new fiscal year, the DPJ has several options. It could stonewall all attempts at reconciliation and keep the gasoline taxes from coming to an Upper House vote past the 60-day limit. It will be hard for the DPJ to maintain credibility with the media if that happens unless new, major scandals involving the road construction money are revealed. Still, the possibility cannot be ruled out, since it just may have to do so to avoid defections. In the event, the LDP-New Kōmeitō coalition will have no choice but to exercise its supermajority in the Lower House to pass the relevant tax bill in its current form, since any amendments made in the Lower House without the consent of the DPJ will have to go back to the Upper House with a new 60-day game clock. The coalition will likely feel compelled to attach a Lower House resolution or something of the sort to the effect that it intends to make the non-partisan reexamination of the issue the top priority item during the next Diet session, if not sooner. Otherwise, the opposition (and the media) will have a field day in excoriating the coalition for enacting a flat ten-year extension. The immediate consequence of this turn of events is a one-month hiatus resulting in a loss of about 200 billion yen or 4% out of the annual gasoline tax revenue. I don't see a major problem fiscally or legally.
A simple Upper House rejection would have more or less the same conclusion, the difference being a few days worth of revenue recovered as the result of an earlier Lower House revote.
The DPJ, with the cooperation of at least parts of the opposition, can also amend the bill in the Upper House and let it pass as amended. In this case, the two Houses must go into a huddle. If the DPJ comes up with an amendment that looks credible to the media (something between the current positions of the two sides) and says, "my way or your way," the coalition will look at the public opinion polls and probably see that it has a very painful decision to make: swallow the amendment whole and let the DPJ take credit for the compromise, or go for the original and take the political hit.
One long-term outcome of all this will be a greater willingness to buck party leadership on individual issues and a corresponding reluctance on the part of the party leaderships to discipline their respective members. The dissent will usually take the form of absence or abstention, though outright defiance cannot be ruled out. All this has happened before. The main difference between then and now is that there is now a credible opposition spanning broadly similar political tendencies as the coalition. This means that both sides are more susceptible to poaching but less so to splintering. Accordingly, the leadership will want to avoid situations that allow dissent to surface, and treat it more leniently when it does.
As I indicated here, I now believe that the DPJ is now gearing up to speed right past the March 31 deadline and let the gasoline tax surcharge lapse. The LDP is surely going to keep sending out feelers to the DPJ leadership while stepping up its lobbying efforts (in cooperation with local government officials and special interests) aimed at the 39 DPJ Diet members (including 25 from the Upper House) who reportedly signed Yasuhiro Ōe’s petition opposing the elimination of the surcharge, and other potential dissenters among the DPJ rank-and-file. The DPJ took a net five-member hit on the BOJ Governor vote in the Upper House (two absented themselves and three abstained, the latter including the rambunctious Mr. Ōe) but none of its members actually voted in favor of Mr. Mutō. However, pressure will be much stronger － from both sides, to be sure － on the gasoline taxes. Further complicating the picture will be the internal dissent on the LDP side.
Assuming that the standoff continues into the new fiscal year, the DPJ has several options. It could stonewall all attempts at reconciliation and keep the gasoline taxes from coming to an Upper House vote past the 60-day limit. It will be hard for the DPJ to maintain credibility with the media if that happens unless new, major scandals involving the road construction money are revealed. Still, the possibility cannot be ruled out, since it just may have to do so to avoid defections. In the event, the LDP-New Kōmeitō coalition will have no choice but to exercise its supermajority in the Lower House to pass the relevant tax bill in its current form, since any amendments made in the Lower House without the consent of the DPJ will have to go back to the Upper House with a new 60-day game clock. The coalition will likely feel compelled to attach a Lower House resolution or something of the sort to the effect that it intends to make the non-partisan reexamination of the issue the top priority item during the next Diet session, if not sooner. Otherwise, the opposition (and the media) will have a field day in excoriating the coalition for enacting a flat ten-year extension. The immediate consequence of this turn of events is a one-month hiatus resulting in a loss of about 200 billion yen or 4% out of the annual gasoline tax revenue. I don't see a major problem fiscally or legally.
A simple Upper House rejection would have more or less the same conclusion, the difference being a few days worth of revenue recovered as the result of an earlier Lower House revote.
The DPJ, with the cooperation of at least parts of the opposition, can also amend the bill in the Upper House and let it pass as amended. In this case, the two Houses must go into a huddle. If the DPJ comes up with an amendment that looks credible to the media (something between the current positions of the two sides) and says, "my way or your way," the coalition will look at the public opinion polls and probably see that it has a very painful decision to make: swallow the amendment whole and let the DPJ take credit for the compromise, or go for the original and take the political hit.
One long-term outcome of all this will be a greater willingness to buck party leadership on individual issues and a corresponding reluctance on the part of the party leaderships to discipline their respective members. The dissent will usually take the form of absence or abstention, though outright defiance cannot be ruled out. All this has happened before. The main difference between then and now is that there is now a credible opposition spanning broadly similar political tendencies as the coalition. This means that both sides are more susceptible to poaching but less so to splintering. Accordingly, the leadership will want to avoid situations that allow dissent to surface, and treat it more leniently when it does.
Monday, February 25, 2008
National: The Political Impact of the Collision off Tokyo Bay; Multi-1,000,000,000,000 Settlement in Store on Gasoline Taxes?
I’ll return to my regular programming when I think that I have a better handle on things here, beyond the facts. In the meantime, here are a couple of memos on things that have interested me of late:
The Atago-Fishing Boat Collision and the Defense Minister
Over here, the collision between the Aegis destroyer Atago and the fishing vessel that left the latter’s two-man crew unaccounted for in the winter waters off Tokyo Bay has almost complete obscured the Okinawa rape story (alleged: I now think that there is a reasonable chance that the US Marine will be facing lesser charges; and yes, stories, but you know what sells ads?). Most importantly, it forced Prime Minister Fukuda’s hand, and, in a twist of irony, actually reinforced the position of Shigeru Ishiba, the Defense Minster*. Not nearly as good for Mr. Fukuda himself though. The accident has further undermined public confidence in his administration. And there isn’t a quick fix in sight.
The 1,000,000,000,000 Yen Giveaway － for Starters?
The ruling coalition is begging the DPJ to come to terms on a settlement for the gasoline taxes. Yesterday, on Sunday Project, Kaoru Yosano, LDP Mr. Fix-It and go-between with regard to the enigmatic DPJ chief Ichirō Ozawa, matter-of-factly lopped 10,000,000,000,000 yen off the 10-Year, 59,000,000,000,000 yen road building program by reminding viewers that public works are being reduced 3% annually in the first place so it adds up to only 49,000,000,000,000 yen. When the incredulous Sōichiro Tawara, the 2,000 year-old host, asked why then they were claiming 59,000,000,000,000, Mr. Yosano answered, “They’re probably saying that to make people feel happy for the time being.” At least that’s what I remember him saying**. In Japanese. I may be off a 1,000,000,000,000 or two.
Now fiscal conservative Mr. Yosano, strictly speaking, is speaking only for himself. But it’s important to remember that the LDP itself is committed to putting the gasoline tax revenue into the general budget under the Koizumi reform. It was always a work in progress, and the process had threatened to crawl to a near-halt under an all-out assault from the road tribe and its supporters. But as Mr. Yosano’s remarkable comment shows, the LDP itself is divided on this issue. Meanwhile, the DPJ has wisely shifted the emphasis away from cheaper gasoline to waste in government.
I’m still still convinced that a compromise will be reached by March 31. But I now believe that it will contain more substance than a simple timeout.
And, yes, it’s a lot of trouble typing twelve zeroes over and over. But it’s fun.
* I hope to have more time later to elaborate on this point.
**Shisaku-san (that’ll have to do until I find out what the non-honorific form of address is in *********ian) should have the video.
The Atago-Fishing Boat Collision and the Defense Minister
Over here, the collision between the Aegis destroyer Atago and the fishing vessel that left the latter’s two-man crew unaccounted for in the winter waters off Tokyo Bay has almost complete obscured the Okinawa rape story (alleged: I now think that there is a reasonable chance that the US Marine will be facing lesser charges; and yes, stories, but you know what sells ads?). Most importantly, it forced Prime Minister Fukuda’s hand, and, in a twist of irony, actually reinforced the position of Shigeru Ishiba, the Defense Minster*. Not nearly as good for Mr. Fukuda himself though. The accident has further undermined public confidence in his administration. And there isn’t a quick fix in sight.
The 1,000,000,000,000 Yen Giveaway － for Starters?
The ruling coalition is begging the DPJ to come to terms on a settlement for the gasoline taxes. Yesterday, on Sunday Project, Kaoru Yosano, LDP Mr. Fix-It and go-between with regard to the enigmatic DPJ chief Ichirō Ozawa, matter-of-factly lopped 10,000,000,000,000 yen off the 10-Year, 59,000,000,000,000 yen road building program by reminding viewers that public works are being reduced 3% annually in the first place so it adds up to only 49,000,000,000,000 yen. When the incredulous Sōichiro Tawara, the 2,000 year-old host, asked why then they were claiming 59,000,000,000,000, Mr. Yosano answered, “They’re probably saying that to make people feel happy for the time being.” At least that’s what I remember him saying**. In Japanese. I may be off a 1,000,000,000,000 or two.
Now fiscal conservative Mr. Yosano, strictly speaking, is speaking only for himself. But it’s important to remember that the LDP itself is committed to putting the gasoline tax revenue into the general budget under the Koizumi reform. It was always a work in progress, and the process had threatened to crawl to a near-halt under an all-out assault from the road tribe and its supporters. But as Mr. Yosano’s remarkable comment shows, the LDP itself is divided on this issue. Meanwhile, the DPJ has wisely shifted the emphasis away from cheaper gasoline to waste in government.
I’m still still convinced that a compromise will be reached by March 31. But I now believe that it will contain more substance than a simple timeout.
And, yes, it’s a lot of trouble typing twelve zeroes over and over. But it’s fun.
* I hope to have more time later to elaborate on this point.
**Shisaku-san (that’ll have to do until I find out what the non-honorific form of address is in *********ian) should have the video.
Monday, December 17, 2007
The LDP Kicks Tax Reform Down the Road, Easing Pressure on the Next Diet Session
I’ve been saying for some time that the regular session is the real deal and the time-limited tax measures will be the main battlegrounds. Here’s why.
During the regular Diet session, which typically begins in mid-January, the Japanese Cabinet submits most tax measures in the form of an omnibus bill to the Lower House, after the usual housekeeping matters have been taken care of and the Prime Minister and other members of his Cabinet have delivered their policy statement speeches and subjected themselves to questioning in the plenary. This year, the Diet opened on 25 January. The omnibus tax bill was submitted to the Lower House on 20 February and was adopted and forwarded to the Upper House on 6 March. For technical and parliamentary reasons*, this process is extremely difficult to accelerate. This alone means that the coalition cannot use the Lower House supermajority to override a hypothetical Upper House veto until late April or early May, a month after time-limited tax measures － consisting mostly of tax deductions, tax credits and lower tax rates － expire at the end of this fiscal year.
That would mean that for a month or more, real estate, stock and a large array of other transactions may have to be conducted while there is substantial uncertainty about their taxation consequences. For starters, many major transactions, such as the purchase of new housing, may have to be deferred and the financial markets could be in for some turbulence, depending on the depth and scope of the disagreements between the coalition and the opposition.
However, the 31 March expiration of the “temporarily” gasoline tax rates would have even more serious effects. First, unlike tax benefits, the extra gasoline tax must be collected from the consumer, at the pump. But because of the anonymous nature of the transactions, it would be impossible to work out an arrangement acceptable to both vendor and buyer that is contingent on the outcome of the omnibus tax bill. So, giving up the extra gasoline tax revenue during the hiatus appears to be the only workable solution.
However, this temporary boon to car users may cause another long delay. Because of technical reasons, the omnibus bill will have to be redrafted to avoid imposing the higher tax retroactively on gasoline sold during the hiatus. But that means that the supermajority cannot be applied, since it will no longer be the same bill that had passed the Lower House. More specifically, unless a duly amended omnibus bill can be passed in the Upper House with the acquiescence of at least some elements of the opposition and readopted in the Lower House, the coalition, at worst, would have to submit an amended omnibus bill in the Lower House** that eliminates this retroactivity, have it adopted there, send it to the Upper House, wait 60 days, then do the supermajority thing in the Lower House. The coalition could draft the omnibus bill in the first place to avoid such an outcome, but that in turn would give the opposition an incentive to refuse cooperation with the overall business of the Diet, this time with the blessing of substantial segments of the press. In this case, the coalition will look like the ones who are being unreasonable.
But does this mean that the DPJ has the LDP up a certain proverbial creek without a paddle? Not quite. Even if some elements of the media turn out to be sympathetic to at least parts of the DPJ agenda, holding the entire tax package ransom at virtual gunpoint without due cause will create serious responsibility issues for the DPJ as well. This is not the refueling resumption bill; you play around with the public’s wallets at own risk. It can hurt you more than it hurts them.
However, the LDP must also tread with care. It so happens that there is a substantial constituency against the extension of the elevated gasoline tax rate***, which the DPJ is keen to exploit. If the LDP mishandles public communications, it could end up as the one being blamed for any trouble that ensues. I suspect that the Ministry of Finance (as well as Prime Minister Fukuda) wants to use this as a legislative ju-jitsu trick, to keep the LDP road tribe from clawing back more of the revenue from the general budget to build even more roads and other related infrastructure. (Look, do you guys want to risk losing it all?)
I don’t have a good handle on how exactly this will work out. My hunch is that the two sides will work out a compromise, if only because of the enormous uncertainties surrounding the potential political risk, including where and on whom the consequences are likely to fall. But this does appear to be the issue that most bears watching to see how (and if) the “twisted” Diet works. And it’s hard enough to come to an agreement when the one most politically controversial item that you have happens to be the legally most complicated one. No wonder, then, that the LDP decided to kick tax reform down the road when it agreed on next year’s tax package.
* Drafting a legislative bill and submitting it to the Diet is incredibly difficult and time-consuming work, and an omnibus tax bill is no exception. The bureaucrats really do need that time, and the drafting team’s game clock can really start ticking only after the LDP has spoken. The Diet has long-established rituals and procedures, which you meddle with at your peril. Remember, that was one of the objections that the LDP raised against the DPJ bid to summon Fukushirō Nukaga and Akio Kyūma for sworn testimony. In 2005, the Diet opened on 20 January, and the omnibus bill was submitted on 16 February and passed on 2 March.
** By custom, a legislative item that has been rejected may not be taken up again in the same Diet session. This does not appear to have the force of law, but the coalition should be reluctant to break this long-established custom.
***Urban car owners as well as businesses apparently do not appreciate the “temporary” measure.
Thanks, MTC, for the corrections to the footnotes.
During the regular Diet session, which typically begins in mid-January, the Japanese Cabinet submits most tax measures in the form of an omnibus bill to the Lower House, after the usual housekeeping matters have been taken care of and the Prime Minister and other members of his Cabinet have delivered their policy statement speeches and subjected themselves to questioning in the plenary. This year, the Diet opened on 25 January. The omnibus tax bill was submitted to the Lower House on 20 February and was adopted and forwarded to the Upper House on 6 March. For technical and parliamentary reasons*, this process is extremely difficult to accelerate. This alone means that the coalition cannot use the Lower House supermajority to override a hypothetical Upper House veto until late April or early May, a month after time-limited tax measures － consisting mostly of tax deductions, tax credits and lower tax rates － expire at the end of this fiscal year.
That would mean that for a month or more, real estate, stock and a large array of other transactions may have to be conducted while there is substantial uncertainty about their taxation consequences. For starters, many major transactions, such as the purchase of new housing, may have to be deferred and the financial markets could be in for some turbulence, depending on the depth and scope of the disagreements between the coalition and the opposition.
However, the 31 March expiration of the “temporarily” gasoline tax rates would have even more serious effects. First, unlike tax benefits, the extra gasoline tax must be collected from the consumer, at the pump. But because of the anonymous nature of the transactions, it would be impossible to work out an arrangement acceptable to both vendor and buyer that is contingent on the outcome of the omnibus tax bill. So, giving up the extra gasoline tax revenue during the hiatus appears to be the only workable solution.
However, this temporary boon to car users may cause another long delay. Because of technical reasons, the omnibus bill will have to be redrafted to avoid imposing the higher tax retroactively on gasoline sold during the hiatus. But that means that the supermajority cannot be applied, since it will no longer be the same bill that had passed the Lower House. More specifically, unless a duly amended omnibus bill can be passed in the Upper House with the acquiescence of at least some elements of the opposition and readopted in the Lower House, the coalition, at worst, would have to submit an amended omnibus bill in the Lower House** that eliminates this retroactivity, have it adopted there, send it to the Upper House, wait 60 days, then do the supermajority thing in the Lower House. The coalition could draft the omnibus bill in the first place to avoid such an outcome, but that in turn would give the opposition an incentive to refuse cooperation with the overall business of the Diet, this time with the blessing of substantial segments of the press. In this case, the coalition will look like the ones who are being unreasonable.
But does this mean that the DPJ has the LDP up a certain proverbial creek without a paddle? Not quite. Even if some elements of the media turn out to be sympathetic to at least parts of the DPJ agenda, holding the entire tax package ransom at virtual gunpoint without due cause will create serious responsibility issues for the DPJ as well. This is not the refueling resumption bill; you play around with the public’s wallets at own risk. It can hurt you more than it hurts them.
However, the LDP must also tread with care. It so happens that there is a substantial constituency against the extension of the elevated gasoline tax rate***, which the DPJ is keen to exploit. If the LDP mishandles public communications, it could end up as the one being blamed for any trouble that ensues. I suspect that the Ministry of Finance (as well as Prime Minister Fukuda) wants to use this as a legislative ju-jitsu trick, to keep the LDP road tribe from clawing back more of the revenue from the general budget to build even more roads and other related infrastructure. (Look, do you guys want to risk losing it all?)
I don’t have a good handle on how exactly this will work out. My hunch is that the two sides will work out a compromise, if only because of the enormous uncertainties surrounding the potential political risk, including where and on whom the consequences are likely to fall. But this does appear to be the issue that most bears watching to see how (and if) the “twisted” Diet works. And it’s hard enough to come to an agreement when the one most politically controversial item that you have happens to be the legally most complicated one. No wonder, then, that the LDP decided to kick tax reform down the road when it agreed on next year’s tax package.
* Drafting a legislative bill and submitting it to the Diet is incredibly difficult and time-consuming work, and an omnibus tax bill is no exception. The bureaucrats really do need that time, and the drafting team’s game clock can really start ticking only after the LDP has spoken. The Diet has long-established rituals and procedures, which you meddle with at your peril. Remember, that was one of the objections that the LDP raised against the DPJ bid to summon Fukushirō Nukaga and Akio Kyūma for sworn testimony. In 2005, the Diet opened on 20 January, and the omnibus bill was submitted on 16 February and passed on 2 March.
** By custom, a legislative item that has been rejected may not be taken up again in the same Diet session. This does not appear to have the force of law, but the coalition should be reluctant to break this long-established custom.
***
Thanks, MTC, for the corrections to the footnotes.
Subscribe to:
Posts (Atom)