Japan Institute for National Fundamentals

June 18, 2012

Prime Minister Yoshihiko Noda left Tokyo in the evening of June 17 for a Group of 20 summit meeting in Mexico, after seeing his ruling Democratic Party of Japan and two major opposition parties reach agreement on revisions to a comprehensive social security and tax reform package.

“He may accomplish more than his recent predecessors combined,” Britain’s Economist magazine said, praising his attitude. His step forward toward a tax increase in an undecided Japan might have been seen as a feat in Europe plagued with credit fears.

Uncertain fate of tax-raising bill

But no optimism can be justified about the fate of the reform package including a bill to raise the consumption tax. There could be a coup within his DPJ in his absence. Former DPJ President Ichiro Ozawa and other DPJ opponents of the tax-raising bill remain tough. Some of them assert their opposition to the bill in the streets, waving banners saying, “We have things to do before raising tax.” Former Prime Minister Yukio Hatoyama has warned that the DPJ could break up if Prime Minister Noda railroaded the package. DPJ Secretary General Azuma Koshiishi pretends to obey Noda while betraying him behind the scenes. Since being asked by Noda just before his departure to put the bill to an early vote at the House of Representatives, or the lower house, Koshiishi has maintained a wait-and-see attitude. This person cannot be expected to be any successful coordinator.

The Prime Minister’s aids apparently plan to obtain the DPJ’s approval on the revised package at its policy meeting June 18 and pass the package through the lower house’s special committee on the reform on June 20, before the lower chamber of the Diet votes for the package, decides to extend the Diet session and sends the package to the upper house known as the House of Councilors on June 21, when the session is now scheduled to end. Prime Minister Noda has formed a tough schedule for the G-20 summit in a bid to come back home by June 20.

The DPJ policy meeting will attract attention first. Opponents of the tax-raising bill may demonstrate their strong protest. In the absence of Prime Minister Noda, other DPJ executives will have to deal with such protests. But they are not necessarily reliable. Even if the package is approved in a torrent of protest at the DPJ meeting, a vote at the special committee on June 20 may be uncertain. The problem is whether the committee’s Chairman Kansei Nakano is prepared and able to lead the panel to railroad the package. If the committee manages to pass the package, it will be put to a vote in the full lower house on June 21. If some DPJ lawmakers vote against the package, even though with the package being passed, the ruling DPJ may effectively break up.

Noda should be prepared to disband DPJ

Nevertheless, Koshiishi may never admit a breakup. This is because he is the DPJ secretary general as far as the party exists. He could choose to shelve the package for the sake of DPJ unity. Even if the Diet session is extended, therefore, it may be uncertain whether the package will pass the upper house where Koshiishi leads DPJ members.

Why would the political turmoil be prolonged so much? Because the DPJ that took government while denying a consumption tax hike is not qualified or able to lead the tax hike. The party unity to which Koshiishi sticks may mean nothing more than the maintenance of such contradiction. If Noda were eager to achieve any true feat, he would have to resolve the contradiction. To this end, he may have to dissolve the lower house for a general election where voters would decide what Japan should do. Even at the risk of disbanding the DPJ, Noda should dissolve the lower house after meeting the precondition that the lower house election system be reformed to correct the disparity in vote value.

Koichi Endo is Director, Japan Institute for National Fundamentals, and Professor at Takushoku University

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