Showing posts with label second stimulus package. Show all posts
Showing posts with label second stimulus package. Show all posts

Thursday, February 12, 2009

Koizumi laughs

Did Koizumi Junichiro just kill the Aso government with a laugh?

Speaking at a meeting of the Diet members' group for the promotion of postal privatization, an LDP study group featuring a number of leading reformists, including Nakagawa Hidenao, Shiozaki Yasuhisa, Takebe Tsutomu, and Ishihara Nobuteru, Mr. Koizumi commented on Aso Taro's recent remarks about "revising" postal privatization.

"More than being angry," he said with a slight smile on his face, "I just have to laugh. I am just totally fed up." (I'm deferring to MTC on the translation.) Asahi describes Mr. Koizumi's criticism as scathing, but watching the video Mr. Koizumi seems more dismissive than angry. He dismissed Mr. Aso as petty and shiftless, unworthy for the role of prime minister. He went on to the prime minister for not listening to dissenting opinions and for have a serious lack of common sense, which have eroded public trust in his leadership. He further suggested that the prime minister should not use the supermajority to pass the bills enabling the second supplementary budget's direct payment plan, which the press is reporting as a suggestion by Mr. Koizumi to his followers to vote against the bill should it come before the lower house a second time.

But more than that, in his laugh Mr. Koizumi effectively waved off the two-and-a-half years of LDP rule since he left office: the readmission of the postal rebels, the backsliding on structural reform, the resurgence of the LDP's old guard and the bureaucracy, the mishandling of the pensions fiasco, the near-total failure to move an agenda despite the supermajority, and now Mr. Aso's turning on Mr. Koizumi's legacy in order to save himself. Without having to say any of that, Mr. Koizumi declared the current government and the LDP bankrupt and unworthy of governing, a declaration amplified by its timing, coming in the midst of uncertainty regarding the passage of the budget and the bills related to the second stimulus package and the government's dismal approval ratings.

Mr. Aso has opted to say nothing in response to Mr. Koizumi, saying that he didn't hear the speech and so won't comment. Yomiuri quoted someone in his retinue dismissing Mr. Koizumi's remarks as "no big deal" because the former prime minister had already decided to retire.

It's possible that Mr. Koizumi's remarks will have no impact. But it's also possible that Mr. Koizumi has cut the thread keeping the reformists loyal.

Jun Okumura has hypothesized that discontented LDP members will not defect but will do everything in their power to distance themselves from Mr. Aso (his post includes a handy list of behaviors to look for). The question now is whether Mr. Koizumi's intervention disproves Jun's hypothesis, whether Mr. Koizumi's "anti-Aso declaration" will serve to rouse the reformists to vote against the government, which would presumably topple the government and set in motion an alignment of some sort during the run up to a general election. I think Jun's logic is sound, but it will be tested by this latest twist in the LDP's collapse.

Perhaps the clearest sign that Mr. Aso is in trouble is that Mori Yoshiro, the self-appointed guardian of the past three prime ministers, did not dismiss Mr. Koizumi's remarks outright. "Mr. Koizumi," he said, "ought to watch his words, but the prime minister also talks too much." Not exactly a ringing endorsement of Mr. Aso.

Tuesday, January 20, 2009

The LDP's tax revolt

The upper house has begun debating the Aso government's second stimulus package and its controversial proposal to distribute roughly two trillion yen to Japanese citizens, 12,000 yen (US$132) per person in the hope of restarting the Japanese economy.

At the same time, the LDP is in the midst what could be the climactic battle in a long civil war over whether to raise the consumption tax.

The two policies are linked, the product of a bargain between the government and the finance ministry whereby the finance ministry agreed to release the stimulus funds in exchange for a commitment from the government to raise the consumption tax at the earliest possible date. Accordingly, the battle raging around these policies involves the same protagonists: on one side, bureaucrat bashers Nakagawa Hidenao, Yamamoto Ichita, and other Koizumian reformists (with Watanabe Yoshimi now sniping from the sidelines), and on the other, Aso Taro, Nakagawa Shoichi, his finance minister, Yosano Kaoru, the economy minister and longtime advocate of consumption tax increase as indispensable for sound public finance, and the Japanese bureaucracy.

The debate is over whether the government should include a commitment to phase in a consumption tax increase from 5% to 10% starting 2011 in the government's mid-term tax program. In making the case for the increase, it appears that Mr. Aso and his ministers will emphasize the importance of the tax for providing economic security for all citizens. Asked about the planned increase in Diet proceedings Monday, Mr. Aso stressed the importance of restoring the country's finances for providing pensions, health care, and welfare for Japanese citizens and insisted that Japan must wait no longer than the time it takes for the economy to recover to set about fixing its fiscal situation. In a sop to the reformers, Mr. Aso has also promised that any tax increase will be accompanied by efforts to cut waste and reform the bureaucracy.

Mr. Aso will likely spell out his thinking on the consumption tax question in his policy speech, which will not be delivered before January 26. Yomiuri reports that his address will spell out his economic philosophy and emphasize the need to put social security on surer footing — and also suggests that Mr. Aso will join in the capitalism bashing, criticizing "market fundamentalism" and distancing the LDP ever further from Koizumi Junichiro's structural reform agenda.

Despite indications to the contrary, the government does not appear to be backing down from its commitment to either half of the stimulus package/consumption tax increase program, despite opposition from within the party, opposition parties, business leaders, and an overwhelming majority of the public. If anything, the government is doubling down on its commitment, despite taking a beating in the court of public opinion — and the prime minister is convinced he will get his way. Asked Monday evening whether he expects rebellion within the party over the bill to revise the tax system for the 2009 fiscal year, which will contain the promised consumption tax increase, Mr. Aso dismissed the idea. His finance minister rejected an appeal from a ministry shingikai to withdraw the stimulus package with an outright "no." Jun Okumura thinks there might be more to it, but it seems possible that the Aso government is so far gone down this path that to abandon this course of action could mean the end of the government, the final push that brings the government's approval rating into the single digits and results in a vote of no confidence.

In any case, in Monday's deliberations Mr. Aso reiterated his government's decision to push forward with the stimulus package

Of course, pushing ahead with the scheme could mean the end of the government as well. While Mr. Aso dismissed the chances of a rebellion should the government need a supermajority to reapprove its bills in the Diet during the current session, the possibility is all too real. The Koizumians, having become the LDP's anti-mainstream since Mr. Koizumi left office in 2006, may finally have been pushed too far. As the Tokyo Shimbun reminds us, it will take only sixteen rebels to defeat the bill should the lower house have to pass it again over upper house opposition. Will sixteen emerge? Even without considering the Koizumians, the Aso government could be in trouble. Even Tsushima Yuji, head of the LDP's tax commission and head of the Tsushima faction, has voiced his opposition to explicitly setting a date for the introduction of a consumption tax increase. One does not need to be a Koizumian to wonder whether it is politically sensible to commit to a consumption tax increase when it appears that Japan still has not reached bottom in the current economic crisis.

But should Mr. Aso get his way in party deliberations and succeeds at introducing a consumption tax commitment into Diet deliberations, the LDP's reformists may finally stand up and say no to the government after two years of being pushed to the side, with Nakagawa Hidenao and Yamamoto Ichita the two leading figures in the campaign against both sides of the government's bargain with the finance ministry. Mr. Nakagawa's fight is as much against the bureaucracy as it is with Mr. Aso. In this post at his blog, for example, Mr. Nakagawa argues that the bureaucrats are insensitive to the lives of the Japanese people, that their planning on the consumption tax question is based solely on economic statistics instead of on the reality of daily life. Mr. Yamamoto writes at greater length on the reasoning behind the opposition of the reformists. Mr. Yamamoto, like Mr. Nakagawa, claims to not be opposed to the consumption tax increase in principle but believes that other steps must be taken first before introducing the tax: steps to eliminate waste, cut the number of Diet members (an intriguing idea, seeing as how Japan has nearly two hundred more national legislators than the United States for a country with just over a third the population), and combat amakudari. He also rejects the arguments floated to defend the idea that a consumption tax increase is political suicide for the LDP — Mr. Yamamoto finds the notions that the public will praise Mr. Aso for tackling the consumption tax issue and for showing how the LDP will pay for its proposals (unlike the DPJ) laughable.

Messrs. Nakagawa and Yamamoto have now been joined by the maestro himself, Mr. Koizumi. The former prime minister met with Mr. Nakagawa and Takebe Tsutomu Monday evening and declared that the idea of setting a date for the introduction of a consumption tax increase is mistaken. Mr. Koizumi's guidance might not influence the government, but it may steel the resolve of the LDP's reformists. I wonder too whether Watanabe Yoshimi's now constant presence on television will give courage to his former compatriots, providing a reminder that they have a place to go should they decide to rebel against the government. Mr. Watanabe's decision to act as an advance guard may yet prove to be a wise decision.

In any case, as this debate unfolds it is worth noting that the tax debate captures everything that is wrong with the LDP today and illustrates why prime minister after prime minister has failed to govern.

The tax issue encompasses everything: Kasumigaseki-Nagatacho relations, the size and role of the state, the future of economic governance (neo-liberalism versus something else), control of the LDP and the government, and the LDP's prospects beyond the 2009 general election. It shows that the LDP is several parties traveling under one label, several parties that increasingly see the political system in fundamentally irreconciliable ways. Mr. Aso and his predecessors have failed because the LDP is beyond the command of any one politician. Japan is ungovernable because the LDP is ungovernable, meaning that the loser in all of this is, of course, the Japanese people, who are no closer to having a government capable of fixing the government's finances and providing the protection they desire.

Is such a government waiting in the wings? The DPJ has been sniping on the sidelines of the LDP debate, presenting an argument similar to the LDP's reformists — the DPJ will oppose any bill stating a date for a consumption tax increase because efforts to reform the bureaucracy should precede any increase in the tax burden for the Japanese people. The DPJ, however, should tread carefully. It is easier to bash the bureaucracy than to offer a plan to fix the budget that does not include a consumption tax increase in some form. And if and when the DPJ forms a government, it will need that selfsame bureaucracy in order to govern.

Finally, as an aside, it is worth asking whether the current Diet, nearing the end of its term, should be allowed to vote on such weighty matters as whether to provide a stimulus package of dubious effectiveness or to commit to a consumption tax increase. While in a purely technical sense the current Diet is, of course, legitimate, it is in some sense a lame duck Diet, given the likelihood that the government will call an election as soon as it has the 2009 budget in hand. Why should a collection of parliamentarians, many of whom will no longer hold their seats at year's end, be allowed to decide Japan's fate at this critical turning point? It is clear why Mr. Watanabe wants an election to be held immediately.

Thursday, January 8, 2009

Watanabe to LDP: I'm outta here

It appears that Watanabe Yoshimi is nearing a decision regarding his future in the LDP. With the second stimulus package scheduled to come to a vote on January 13, Mr. Watanabe could leave the LDP in a matter of days.

Mr. Watanabe appears to be working hard to exacerbate tensions with the LDP. Not surprisingly, the prime minister rejected his demands regarding the timing of a general election and administrative reform, with the LDP mocking them as reflective of Mr. Watanabe's "heroic delusions." Not that it was ever likely that the prime minister would cave to the demands of a discontent backbencher.

Mr. Watanabe has also been going after the prime minister on the question of administrative reform. He expressed his dissatisfaction with Mr. Aso's response to a question in Thursday's Diet proceedings, suggesting that he has "given up hope" in the possibility of Mr. Aso's eliminating the practice of amakudari. Mr. Watanabe plans to question Mr. Aso directly in Diet proceedings on Friday on the same matter, which appears like a prelude to a vote by Mr. Watanabe against the second stimulus package on Tuesday.

All of this is to be expected. Mr. Watanabe has made it nearly impossible to remain in the party and have any measure of influence: better a flight to the wilderness than internal exile. His exodus may, however, be a lonely one. None of his fellow reformists have stood up to be counted with him. For all their opposition, none has publicly stated his or her intention vote against the stimulus package. The LDP is taking seriously the threat of rebellion on Tuesday — Asahi reports that the party is trying to get every member to commit to voting for the supplemental budget, along with trying to sell the plan to a wary public — but it seems unlikely that Mr. Watanabe will have company if he decides to oppose the bill.

For an example of the attitude of Mr. Watanabe's fellow reformists, see this blog post by first-termer Yamauchi Koichi, in which Mr. Yamauchi expresses his agreement with Mr. Watanabe's policy ideas, but indicates that he will not take the step of leaving the party, preferring instead to continue to work on improving the LDP from within. This attitude seems to be shared by Yamamoto Ichita, who at the same time that Mr. Watanabe has drifted further into rebellion, has created yet another study group opposing some dimension of the government's agenda, in this case the plan to raise the consumption tax in three years' time. Mr. Yamauchi is one of eight members of the new study group. For all the fanfare that surrounds some of these groups, I'm not certain that they accomplish anything, and as Mr. Watanabe is learning, they apparently do little to build solidarity among ideological compatriots. (Indeed, in the midst of all this, Mr. Watanabe just joined a study group with former Koizumi lieutenant Takebe Tsutomu.)

So the question remains then as to what will happen when he leaves the party. The DPJ is reportedly reaching out to Mr. Watanabe, but whether he will take the opposition party's hand is unknown. Presumably he won't do so without some position of prominence being given in return.

The result is that if and when Mr. Watanabe votes against the government's stimulus package Tuesday, the Japanese political system will step into the unknown. Mr. Watanabe's leaving could be the first domino of a political realignment or it could be a futile, isolated step that marks the end of Mr. Watanabe's career.