This Week’s “Nagata-cho” (June 3-10)

Prime Minister Shinzo Abe on June 5 pledged to reduce Japan’s corporate tax rate in fiscal 2015 at the G-7 summit meeting held in Brussels. Also, Abe showed decisiveness to tackle with such issues as regulatory reforms in the power, medical care and agriculture, new growth strategy including new working hours and foreign workers, and public sector reforms such as GPIF that operates pension funds.

Prior to that on June 3, the ruling Liberal Democratic Party finalized its suggestion on the corporate tax　reform in the party’s Tax Commission. While it accepts the in-effect corporate tax reduction, it recommended expansion of the taxation targets to deficit-making companies and creation of some permanent alternative financial source covering the loss to be caused by the tax-reduction. Although LDP Tax Commission and the Ministry of Finance had opposed the corporate tax reduction, it now seems that LDP made conditional concession due to Prime Minister Abe’s strong decisiveness.

Now the ruling coalition and Cabinet are on the track of practical corporate tax reduction. It will be entailed in the Basic Guideline for Economic and Fiscal Policy to be released in the end-June after consultations within the ruling camp and Cabinet. Final detailed arrangements will be arranged in the end-year tax reform discussions.

While the economic recovery minister Amari announced a numerical target of “20s % in about 5 years,” it is yet clear to what extent and period of time the tax-reduction will be. Also, ministers have different views on alternative financial sources and there have been no sign of coordination so far. It will likely be a focus of bargaining within the ruling coalition and Cabinet.

*The state of deliberations in both Houses and committees are available from the following websites.
 House of Representatives Internet TV：http://www.shugiintv.go.jp/en/index.php
 Live broadcasts and video recordings of the deliberations in the House of Councillors (Japanese only)：http://www.webtv.sangiin.go.jp/

Seven political parties agreed and passed the national referendum bill that lowers the voting age from 20 to 18 years old in the Upper House on June 11. Accordingly with passage of the bill, the submitter seven parties will hold a first meeting of joint project team by the end of this ordinary Diet session.

On a Diet monitoring body over the information protection to be established based on the Special Intelligence Protection Law enacted late last year, the ruling parties and opposition Democratic Party of Japan held a consultation meeting on June 4. LDP and New Komeito suggested a Committee for Information Oversight (tentative) in both Houses that judges appropriateness of information protection and an idea of revising the Diet Act to entail punishments to Diet members who leaked information. On the other hand, DPJ will propose a counterproposal to the ruling camp’s revised Diet Act already submitted to the ordinary session. DPJ’s proposal aims to make it compulsory for the Cabinet to disclosure information when the President of either House request the government with some exceptional cases.

On the Upper House electoral system reform to correct disparity in the weight of one vote, LDP’s Secretary-General in the Upper House Waki drafted a proposal to integrate less-populated 20 constituencies into 10 as well as 10 into 5, along with the already-drafted party line to integrate 22 constituencies into 11. These three proposals will be lined up and be discussed simultaneously in the next meeting to be held on July 26. While each denomination in the Upper House is expected to discuss the proposals, there are strong oppositions even in LDP so there is a possibility that any of the proposals won’t be accepted. LDP will establish a project team soon to carefully discuss its proposal, taking 1-2 month.

On a constitutional reinterpretation concerning collective self-defense, LDP requested to increase the frequency of meeting with the coalition partner Komeito in order to accelerate discussions. Komeito accepted the offer so the meeting will be held twice a week. Out of the 15 scenario of so-called “gray-zone” cases, Komeito leaned to accept two cases. The government further proposed ideas to simplify procedures of Cabinet approval for scrambling (via telephone) and others, but pacifist-leaning Komeito reserved responses as LDP did not deny relooking standard for arms usage by revising the SDF Act. In a meeting on June 6, the parties finally agreed to maintain the legal framework and to respond by changing implementation of the law, due to the concession made by LDP. New legal framework will be considered sometime in the future, they agreed.

At the same time, 4 scenarios in relation to international cooperation activities were discussed in the meeting. 3 gray-zone scenarios and 4 international cooperation scenarios are now displayed on the negotiation table, and the coalition talks started discussions on eight specific scenarios in which Japan can exercise its right to collective self-defense, including protecting U.S. ships and removing naval mines in the Persian Gulf this week. In eye of revising the Japan-U.S. defense cooperation (“Guideline”) in the year-end, Abe instructed to prepare for Cabinet approval before the end of the current Diet session. On the same day during talks between the coalition partners, LDP Vice President Komura asked government officials to prepare a draft of the constitutional reinterpretation for eventual Cabinet approval.

In a bid to gain the support of reluctant Komeito, the Abe administration is preparing "guidelines" to limit the activities of the Self-Defense Forces when exercising the right to collective self-defense: A key element of the guidelines will be a restriction on dispatching SDF members overseas and Diet involvement. The coalition talks have faced a climax this week.

There was a party leaders’ debate this week on June 11, whose tone remained relatively calm. It might trigger other moves toward realignment of the opposition parties. Remaining less than two weeks to the end of the Diet session, let’s see impacts of the leaders’ debate carefully.