Consumption tax issue to dominate politics in 2012

January 05, 2012

The political battle over raising the consumption tax rate is expected to escalate this year, leading to a possible Lower House election or even an overhaul of the political landscape.

Three scenarios could unfold from the consumption tax issue and a snap election, none of them particularly favorable for Prime Minister Yoshihiko Noda.

1. Possible breakup of DPJ

Noda said in a Jan. 4 news conference that he would ask the opposition parties from next week to join discussions reforming the social security system and raising the consumption tax rate.

But the main opposition Liberal Democratic Party is more focused on forcing a Lower House dissolution within the ordinary Diet session expected to convene later in January.

At a news conference the same day, LDP head Sadakazu Tanigaki said 2012 would be an important year politically, indicating his party would not enter discussions with the ruling Democratic Party of Japan.

Calling the proposal to raise the consumption tax rate a violation of the DPJ's campaign manifesto for the 2009 Lower House election, Tanigaki said, "The DPJ administration is not qualified (to call for multipartisan talks)."

New Komeito head Natsuo Yamaguchi also indicated his party was willing to go along with the LDP, saying the DPJ proposal did not present an overall picture of how the social security and taxation systems would be reformed.

LDP officials said they wanted to force a Lower House dissolution in March or April, before the Noda Cabinet actually submitted the consumption tax increase legislation to the Diet.

The LDP also could boycott Diet deliberations if Noda does not dismiss Defense Minister Yasuo Ichikawa and Kenji Yamaoka, the state minister in charge of consumer affairs. The Upper House has passed censure motions against both Cabinet ministers.

DPJ Secretary-General Azuma Koshiishi said on Jan. 4 that the party would submit the consumption tax bill to the Diet and seek passage in the Lower House even if the opposition parties do not join the discussions.

A problem with that strategy is that resistance will inevitably arise from those within the DPJ who are opposed to a consumption tax increase.

DPJ defectors have already set up a new political party. Others are planning a similar move. The ruling party could possibly break up, especially if political heavyweight Ichiro Ozawa takes his group, the largest in the DPJ, and bolts.

Some within the DPJ feel that Noda may dissolve the Lower House before a mass defection and have voters decide on the consumption tax increase proposal.

2. No-confidence motion to topple Noda Cabinet

A development that is possible, but not highly probable, is for opposition parties to agree to discuss a consumption tax hike in exchange for Noda's promise to dissolve the Lower House.

Because the government will need the cooperation of the opposition parties in the Upper House to pass not only the consumption tax bill, but also legislation to issue government bonds to pay for budget projects, Noda likely would strive to reach a compromise with the opposition.

However, DPJ officials are adamantly opposed to any promise to dissolve the Lower House because they fear a huge loss of seats in a subsequent snap election due to public criticism over raising the consumption tax.

For those reasons, the real scenario being drawn up by the LDP and New Komeito is to delay a vote on the consumption tax legislation until the scheduled end of the Diet session in late June and then submit a no-confidence motion against the Noda Cabinet.

The thinking is that if Noda insists on passing the legislation, a large number of DPJ lawmakers would break from the party line and vote in favor of the no-confidence motion.

Another factor playing into that scenario is the trial of Ozawa, who has been indicted on charges of playing a role in falsifying political fund reports of his organization.

A verdict in Ozawa's case is expected in April. A ruling of not guilty could serve as the catalyst for more aggressive moves by Ozawa's group, which is generally opposed to raising the consumption tax rate.

If a large majority of the 106 members of a policy group established by Ozawa should vote for the no-confidence motion, it would pass the Lower House, forcing Noda to either resign or dissolve the chamber.

"The most important thing will be the timing of the submittal of the no-confidence motion," an LDP executive said.

3. Inner turmoil in the DPJ and LDP

If the consumption tax bill does not pass the Diet, Noda will find it difficult to win re-election as DPJ president in the election scheduled for September.

If public support ratings for his Cabinet remain low, Noda may be forced to step down because DPJ members would want a new leader who would help the party's chances in a Lower House election.

But if the LDP fails to force Noda to dissolve the Lower House, Tanigaki's standing as party leader would also weaken, and he would have almost no chance of winning re-election as LDP president in the party's election, also expected in September.

LDP members would also look for a more charismatic party leader who could lift the party's chances in the Lower House election. They might end up electing Nobuteru Ishihara, the current secretary-general, or Shigeru Ishiba, a former policy chief.

Should this scenario unfold, a wild card player would be Osaka Mayor Toru Hashimoto.

Hashimoto has indicated the possibility of running candidates in a Diet election from his Osaka Ishin no Kai (Osaka restoration group), which has so far only elected members to the municipal and prefectural assemblies.

Osaka Governor Ichiro Matsui, a close ally of Hashimoto, said on Jan. 4 that the Osaka Ishin no Kai would establish a "school" to foster potential candidates for a Diet election.

A major policy goal of Hashimoto is to establish an Osaka metropolitan government. However, such a move would require revising the local government law.

If legislation to revise the law does not pass the Diet, Hashimoto plans to support candidates of parties that are cooperative or field candidates from the Osaka Ishin no Kai within the Kinki region.

The new school will likely be used to show the established parties that the group is serious about fielding candidates, and thereby apply pressure on the parties to revise the local government law.

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The major players in 2012's political chess game, clockwise from left: Prime Minister Yoshihiko Noda; Ichiro Ozawa, former DPJ president; Sadakazu Tanigaki, LDP leader; and Osaka Mayor Toru Hashimoto (Asahi Shimbun file photos)

The major players in 2012's political chess game, clockwise from left: Prime Minister Yoshihiko Noda; Ichiro Ozawa, former DPJ president; Sadakazu Tanigaki, LDP leader; and Osaka Mayor Toru Hashimoto (Asahi Shimbun file photos)

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  • The major players in 2012's political chess game, clockwise from left: Prime Minister Yoshihiko Noda; Ichiro Ozawa, former DPJ president; Sadakazu Tanigaki, LDP leader; and Osaka Mayor Toru Hashimoto (Asahi Shimbun file photos)

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