TOKYO – The International Herald Tribune carried an arresting headline last week: “Japan Leader Battles his Party in Bid to Raise Tax.” In this day of worldwide austerity, Prime Minister Yoshihiko Noda stands out as politician who has literally bet his political life on the proposition that he can get parliament to raise taxes.
Whether he can pull this off will become apparent over the next two weeks, as his bills to effectively double the national sales tax must clear both houses of parliament by June 21, when the current session officially winds up. It's uncertain, though, if he can extend the parliament’s life further even with the passage of the bills.
As the headline in the IHT revealed, Noda has to maneuver on two fronts. There is considerable opposition within the ranks of his own party, the Democratic Party of Japan (DPJ), as last week Noda tried unsuccessfully to persuade the leader of the largest faction, Ichiro Ozawa, of the necessity for raising the sales tax.
Having failed in that approach, Noda immediately pivoted to the opposition, made up of the Liberal Democratic Party (LDP) and its coalition ally Komeito. If he cannot pass the bill with his own party, he looks to form a short-term alliance of opportunity with the opposition to approve the bills. In any case, he needs LDP cooperation to pass the upper house where the DPJ is in the minority.
In an effort to secure his coaltion, Noda reshuffled his cabinet in a minor way, relieving two members - Defense Minister Naoki Tanaka and Transport Minister Takeshi Maeda - both of whom had been formally censured for misstatements by the LDP-controlled upper house of Japan’s bicameral legislature. The move has been viewed viewed as kind of peace offering to the opposition.
Noda’s party has a huge majority in the more powerful House of Representatives as a result of its historic landslide victory in the summer of 2009, so by rights he should have no trouble imposing a party-line vote in parliament. After all, as party president he can expel dissidents from the party and deny official support in the next election.
However, the faction loyal to Ozawa is large and could join with the opposition parties to defeat the bill. That assumes of course that all 100 or so members of the Ozawa faction in parliament follow his advice and vote against their own government when the crunch time comes. That is a big uncertainty.
Noda’s flirtation with the opposition is not as quixotic as it might seem. Unlike the Republican Party in the U.S., the LDP is not opposed in principle to raising taxes. No opposition member has signed a pledge to oppose any and all tax increases. Many members believe that raising the consumption tax is necessary to keep the country solvent.
A 5 percent national sales tax was first imposed in Japan in 2005. Noda proposes to raise this in two stages to 10 percent by 2014. Virtually all of the revenue would go to shore up social security, which suffers from the familiar problems of rising outlays and declining revenue base as the country ages.