This Week’s “Nagata-cho” ( 1-8.Oct, 2013)

 The Cabinet approved on Oct 1 the plan to raise the consumption tax

rate from five to eight percent on Apr 1 as scheduled in the

legislation passed under the former Democratic Party of Japan

administration. At the same time, the Cabinet agreed to sketch a \5

trillion economic stimulus package to mitigate potential negative

impacts of the tax-hike on the country’s nascent economic recovery.

 Bank of Japan’s survey on the economic sentiment released on the

same day marked the record +12 in the post-Lehman years. Along with

the other economic indicators showing positive signs that the economy

has picked up, it had propelled the government’s Council on the

Economic and Fiscal Policy to show a green-light on the tax-hike.

Accordingly, Prime Minister Shinzo Abe announced he will raise the tax

rate as scheduled on Oct 1. Abe also announced the \5.1 trillion of

government revenue expectedly increasing from the next fiscal year by

the tax rise will be allocated to the social security alone as pledged.

 Over an idea to end special corporate tax surcharges for

reconstruction in disaster-hit Tohoku a year earlier than planned, the

ruling Liberal Democratic Party failed to obtain its coalition partner

New Komeito’s agreement and the two parties merely agreed to revisit

the proposal by year’s end. Abe has also repeatedly announced

corporate tax reduction to boost the broader economy and to attract

more foreign business investment, but many lawmakers in LDP’s tax

panel and Komeito do not buy the idea. Meanwhile, the Ministry of

Finance, led by Deputy Prime Minister Taro Aso, insists of some

alternative tax targets in case of the corporate tax cut. It is to see

how Abe and his Cabinet will negotiate with the lawmakers and the

bureaucracy.

 The minor coalition partner Komeito has suggested an earlier

designing of reduced tax rates on the daily necessities like food

prior to the next elevation to 10 percent in October 2015 and urged

Abe to announce an introduction of the design within this year. But

many Cabinet and LDP members voiced cautiously on the notion. The

interparty talks will likely continue.

 Chief Cabinet Secretary Suga told the Rules and Administration

Committees in both Houses officially that the Cabinet will convene the

next extraordinary Diet session on Oct 15. The session will be for 53

days until Dec 6. Although the ruling and opposition parties are yet

to reach an agreement on the schedule of Prime Minister’s general

policy speech and Q&A by the party leaders, the main policy issues in

the session will likely include the tax-hike and economic stimulus,

social security reform, employment regulation, diplomacy and national

security, TPP talks, the contaminated water leaks in Fukushima, etc.

 Abe and his Cabinet plans to submit the bills regarding the “third

arrow” growth strategy one after another based on the “Course of

Action” officially approved on Oct 1, such as the bills on industrial

competitiveness, power industry reform and farmland management, etc.

On the other hand, the opposition parties, while having diverse

attitudes on the tax-hike, are preparing to question the Cabinet on

the legitimacy and reasonability of the tax-hike and economic stimulus

package. While DPJ will challenge the Cabinet centering on the social

security issues, Your Party will demand the government to tackle with

other challenges like the civil service reform and administrative

reforms. The Communist Party is strongly repelled by the government’s

policy to end the special corporate tax deduction in Tohoku and the

deregulatory measure in labor suggested by the government’s panel on

the regulatory reform.

 In the field of diplomacy and national security, the Cabinet plans to

submit bills to enable SDF to transport Japanese living abroad, to

establish Japanese-version of National Security Council, and on long

prison terms mandated for leaks of top-secretary information. The

third, secret-information bill has caused a particularly strong

opposition. The duration of time to be allocated for discussion on the

bills regarding the NSC and secret-information will likely be for only

about 5 weeks. For there are many bills the Cabinet plans to submit in

the next Diet, the ruling camp risks walking a tightrope in

time-managing the session although it dominates the majority in both

Houses. For this, the ruling camp plans to establish Special

Committees in both Houses to discuss on the bills instead of referring

the bills to the existing committees. Adversely, the opposition camp

requests an establishment of a Special Committee on the TPP instead.

 LDP’s intraparty discussions on the TPP and exceptional items on

tariff policy are to be resumed soon, according to chairman of the LDP’

s TPP committee Nishikawa’s press comment on Oct 7. Also the

lawmakers will consider countermeasures regarding Japan’s agriculture

in case the tariffs are eliminated. Chief Cabinet Secretary Suga

stressed that the Cabinet will act in concert with LDP. While some

lawmakers are showing the attitude accepting parts of the focal five

items to be excluded from the exceptions, the oppositions from more

protective lawmakers seem to be inevitable. On Oct 3, a group of LDP

lawmakers passed a resolution to demand the Cabinet to retreat from

the TPP negotiations in case the “sanctuary” fields are not to be

maintained. Intraparty bargaining will likely be accelerated toward

the reconsideration. The opposition parties will strongly censure the

ruling camp from both sides of pros and cons of the TPP.

 The extraordinary session will start from the next week. There will

likely be active negotiations and bargaining behind the scenes. Also,

what will Abe speak in the general policy speech and what sort of

attitude will Abe state over the important legislations to be

proposed? Let’s watch the prospects carefully.