Koizumi’s Fiscal Kabuki

Okay, okay. I was just kidding about the kabuki bit in the subject line.

But listen:

One of the news stories currently making the rounds is a proposal by the LDP Fiscal Reform Study Group to hike consumption taxes from the current 5 per cent level to somewhere between 10 to 15 per cent. Increased revenues would then be used to pay for governmental expenditures on welfare, specifically public pension and insurance programs.

Now, Koizumi has said on numerous occasions that he would not increase the consumption tax during his tenure (which ends next September), but following the announcement by the study group did acknowledge the necessity of doing so (after he leaves office, of course). So, here we have the Prime Minister and his party saying that a tax hike is unavoidable sometime in the near future, but they’re not gonna do it just yet.

Of course, we didn’t hear much talk about raising taxes from the LDP before September’s general election. In fact, if I recall correctly, about the only thing we did hear was Koizumi saying that he wouldn’t raise the consumption tax while he was in office. The DPJ, on the other hand, included in their Manifesto a proposal to raise the consumption tax to 8%. And what were they going to do with this windfall inflow? Why, pay for governmental expenditures on welfare, of course.

And what is the LDP reaction to this attempt to steal their thunder on even an unpopular issue such as tax hikes? Criticize them for not going far enough.

From the Japan Times:

“I am not sure that the DPJ plan is enough,” Koizumi said. “There will certainly be calls for tax revenues to cover not only pension programs but also medical and nursing programs.”

The man talks a great game: he speaks to the public about the necessity of making tough decisions, makes the DPJ look like the protectors of the status quo in the process, but refuses to take action himself. Meanwhile, the DPJ gets clock cleaned and its initiative stolen.

3 thoughts on “Koizumi’s Fiscal Kabuki”

  1. Speaking of the consumption tax issue, have you seen where it first made the national agenda?

    It was in the (powerful business group) Keidanren’s 2003 “Vision 2025” or whatever, in which they call for a whole slew of reforms including Juki Net, complete economic integration for Asia, and, last but not least, voluntary euthanasia centers for the elderly.

    If you read the Nikkei Shimbun, you’ll notice that a good number of the issues they focus on in depth (relationship between industry and academia, for example) come from this list. Is this report simply a reflection of obvious issues Japan needs to tackle, or are the business interests setting the agenda themselves? You’ll see it’s a little of both… Anyway, take a look at it for yourselves if you want to see what Japan will look like in 20 years:


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