The government held a meeting of a panel studying the possible impact
of a sales tax hike on the country’s nascent economic recovery on
Council on Economic and Fiscal Policy, Intensive meetings
The government plans to hold hearings on the impacts of a scheduled
tax-hike to 8 percent in April and to 10 percent in October 2015 to
the economy and market. The interviews will be held toward around 60
experts from the business, labor, industry, consumer, NPO, local
government and private economists. Also, Prime Minister Shinzo Abe
requested to interview his special advisor Hamada and Honda. The
interviews seemed to be planned on an intension to pause that Abe will
carefully decide the tax-hike after a thorough consideration. On
August 26, 7 figures attended the meeting to have discussions.
Abe schedules to give a final decision around end-September to
early-October looking at the economic indexes like the real GDP in the
June-Sep quarter to be updated on September 9 and Bank of Japan’s
short-term observation to be released on June 1. The timing will
likely be before the APEC summit meeting in Indonesia from October 7.
The result of the panel meetings will be compiled under the economy
minister Akira Amari and reported to Abe in early-September.
The lawmakers in the ruling coalition seem to have complicated
feelings on the discussions. While many worry that the consumption tax
increase could weaken the economic recovery, the policy was arranged
by the trilateral agreement by LDP, DPJ and New Komeito themselves so
they cannot show their negative attitudes openly. Shigeru Ishiba, LDP
Secretary-General, said he would take countermeasures to the possible
negative effects of the tax-hike in the supplementary budget and
initial budget FY 2014 and necessary tax reforms.
Rather, yet, many lawmakers pay more attention to allocation of the
revenues increased by the tax-hike. For the legislation enacted last
year puts that the resource may be allocated to the field of disaster
management, the lawmakers expect of public works projects leading to a
land-enhancing policy along with the LDP’s party line.
The bureaucrats in the Cabinet Office and Ministry of Finance seem to
be making efforts to make an environment for the tax increase by
distributing documents to the ruling lawmakers, saying that the
economic deflation after the 1997 tax-hike was mainly due to the Asian
Financial Crisis not the tax-hike itself.
Meanwhile, LDP started a full-scale discussion on the next year’s
taxation reform in the party panel (chaired by Takeshi Noda) toward
compilation of the second growth strategy eyeing to draft an outline
by mid-September. The lawmakers will have discussions on a corporate
tax decrease to stimulate investment money combined with reregulation
over quake-resistant construction and energy conservation.
LDP also plans to draft a reform plan on the Legislative Brach soon.
There had long been a criticism that the obligation to Prime Minister
and other ministers to attend the Diet sessions is too heavy that it
hindered the national interest over the country’s diplomacy sometimes.
LDP held a committee meeting on August 23 to discuss countermeasures
including establishing a custom that the vice-ministers attend the
Diet on behalf of the ministers. In fact, Japan Restoration Party had
moved a similar suggestion and called for discussions to the other
parties, and LDP eyes to enter discussion with Japan Restoration and
plans to submit a reform plan in the extraordinary Diet session to be
convened in October.
On August 26, LDP and the coalition partner agreed to call DPJ for a
trilateral meeting to discuss the Lower House election system, Diet
reform, social security, etc. The ruling coalition seeks to avoid
partisan confrontation over the issues like the electoral system or
the social security, but the main opposition DPJ is cautious about the
ruling camp’s clinching tactic.
The government’s studying panel on the impact of a consumption tax
increase is scheduled until August 31. To what extent the discussion
will be undertaken and what kind of countermeasures to the possible
negative effects will be proposed? While it is unknown how much
suggestion will be reflected into Abe’s final judgment in the near
future, the contents of discussions in the meetings deserve public
attentions to foresee the prospect.