Japan tax debate may undermine deeper reforms

16-Jun-2012 Intellasia | WSJ | 7:01 AM Print This Post

The Democratic Party of Japan swept to power nearly three years ago after promising a clean break from the way politics and policy making had been carried out over the previous five decades.

But as party leaders scramble to enact their top legislative priority – a sales-tax increase to curb the country’s debt – some members say it’s the DPJ that has changed: by casting aside some of its election manifesto promises and drawing closer to the policy platform of the long-time ruling party it ousted.

The result may mean progress in Japan’s push to draw down its bloated borrowing, but it could also be a setback for the cause of creating a vibrant, competitive two-party system that has long eluded one of Asia’s oldest democracies.

“It appears more and more that perhaps the major achievement of the transfer of political power … has been to bring about policy convergence between the country’s two major parties,” said Gerald Curtis, a Columbia University political scientist specialising in Japanese politics.

“Terrific if that means an end to fruitless ideological debate and a focus on a more substantive policy debate,” he said. “Not so terrific if it means that voters can’t figure out what the differences between the parties are.”

The main opposition Liberal Democratic Party had advocated increases in the consumption tax periodically in the three decades before it lost power.

In its 2009 campaign to oust the LDP, the DPJ said it would delay any tax increases for at least four years and pledged to sweeten pension and medical benefits for the elderly. But DPJ leaders this week agreed to shelve the latter two policies for at least a year in order to win support for the tax bill from the LDP, amid concerns that resistance to tax increases within their own party could defeat the measure.

“The public’s distrust of pensions and health care [under the LDP] and our proposals were what brought us to power,” Hiroshi Kawauchi, a DPJ member of parliament, told reporters Tuesday after being briefed by party negotiators on the state of the talks. The emerging tax-bill deal, he added, “would mean that the DPJ has turned into the LDP.”

DPJ leaders say they haven’t violated their tax-increase-delay pledge, noting that if the legislation were to pass it wouldn’t begin to take effect until April 2014, about four and a half years after the party took power. They add that making the tax increase an urgent priority after taking office was a responsible, flexible response to the sovereign debt shocks that began jolting global markets after they took office.

Taxes and elderly benefits are just two items on a long checklist of examples of the DPJ dropping, delaying or watering down promises of change from nearly half a century of unbroken LDP rule, illustrating the difficulties of transforming Japan’s political system. It also reflects the realities of governing that opposition parties all over the world face once they take power.

The DPJ’s leader at the time of the 2009 election, Yukio Hatoyama, promised to kill a controversial plan to build a new American Marine base on the southern island of Okinawa and, more generally, to seek more distance from Washington and closer ties with China.

After months of pressure from Washington, Hatoyama reversed course and endorsed the base plan and embraced the US-Japan alliance cultivated under the LDP. His flip-flop helped to force him from office.

The DPJ also campaigned against the LDP’s famous reliance on public-works spending, saying it favoured the influential construction industry over average families.

Shortly after taking office, the party’s first public works minister suspended construction of the Yamba Dam in central Japan, a decades-long JPY 460 billion ($5.8 billion) project that the party singled out as the poster-child of excessive pork-barrel spending. Last December, the government agreed to resume work, after officials said they had concluded the dam was needed to prevent flooding.

The DPJ has kept its promises to give tax credits to parents with young children, and to make tuition at public high schools free. But the party has agreed to consider curbing both of those benefits in order to win support from the LDP to pass crucial bond-issuance legislation.

Critics say the DPJ has also stumbled in its pledge to change the LDP’s style of governance, which was marked by weak political leaders and a powerful bureaucracy. The LDP ran through 13 prime ministers in its last 20 years in power, and the DPJ is now on its third prime minister in three years.

If current prime minister Yoshihiko Noda fails to push through the sales tax, his term could also be short-lived.

When first taking over, the DPJ abolished a long-standing practice of having career-bureaucrats prepare the agenda for cabinet meetings. Noda restored that practice after he took office last September, and his party’s growing reliance on a bureaucracy that has served both the LDP and DPJ may help explain the recent policy shifts.

“The DPJ has retreated almost completely from its political reform goals,” Curtis said. “They’re at least as dependent on the bureaucracy as the LDP ever was.” -By TOKO SEKIGUCHI And JACOB M. SCHLESINGER

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