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2017 General Election and Japan’s True Agenda

   General election will be held on October 22 in Japan. Calling a general election is the sole right of the prime minister.

  Prime minister Shinzo Abe asserted as the reason for calling general election as follows. Japan plans to increase consumption tax rate from the current level of 8% to 10% in October 2019. It is presumed that out of 2 percentage points of increase of consumption tax, 80% is to be used to reduce the outstanding government fiscal debt, and the rest is to be used to enrich social security and education. Prime minister Abe wishes to change this balance of using the increased tax revenue accruing from the 2 percentage point increase of tax rate. He means to spend greater proportion of increased tax revenue to enrich social security and education. Since he proposes to change the pattern of use of the increased tax revenue from the planned pattern, he would like to get agreement of people by general election.

   While his formal reasoning has a certain cause, his real reasons behind seem more or less evident. There are two reasons.

   The first is the reason to seek great victory by choosing a timing when the opposition party which just changed its top is not yet ready. Since the largest opposition party, Democratic Party of Japan, has just elected new head, Mr Seiji Maehara, at the end of August, and the party is not yet quite ready to act full-fledged way partly because of suffering from some problems as a scandal of prospective executive member, Mr. Abe judged it a nice timing to call a snap election to gain a larger turf for the parties in power, namely, Liberal Democratic Party(LDP) and Komei Party. And with this strengthened political basis, seeks to empower the drive to change the constitution, primarily to add the name of Self Defense Force along with the oft cited no war promise prescription of article 9.

The second  is the reason to recover sharply dropped popularity rate by the general election. The approval rate of Abe cabinet has been dropping sharply in recent few months. While Abe administration has been achieving appreciable results in major policy areas such as economic policies, international relations and security policies, its approval rate has been dropping sharply by a series of minor scandals such as providing special benefits to Mr. Abe and his wife’s close friends who are running schools, inappropriate expressions of some inexperienced cabinet members and scandals of some new members of LDP. While Japanese public do not appreciate or care about Mr. Abe’s contributions on major policies, they are very keen to individual and minor scandals. They are so curious to know whether Mr.Abe himself is involved in providing benefits to close friends which the cabinet has kept denying.

   On Sept 28, the first day of the new diet session, prime minister Abe declared at the beginning to dissolve the Diet without having any policy speech nor debate, the action which is unprecedented in the recent history of the national Diet. It was announced that the election will be called on October 10, and voting day will be October 22. Opposition parties criticized that this dissolution has no legitimate cause, and denounced that this dissolution means to hide and erase the scandals which Mr. Abe must be involved by the election.

   Opposition party politicians criticized that Mr. Abe’s dissolution of the assembly has no due cause. In stead, they accused Mr.Abe that he called for the election in order to hide or nullify his political scandals by the election.

   Given the circumstances, many expected that parties in power represented by Mr. Abe will easily gain a major victory. However, the situation changed dramatically toward the end of September by an unexpected bold action of Mr.Yuriko Koike, the governor of Tokyo.

   Let me explain a bit about recent actions of Mr.Yuriko Koike. In July last year, 2016, she dared to run for Tokyo governor in spite of a strong opposition and criticism of the top executives of LDP against her. By that time the relationship between Ms. Koike and Mr.Abe has become one of the worst. Ms.Koike has been given earlier an important position of Abe’s administration such as minister of defense. She quitted the position shortly and later ran to support the campaign of  Mr. Ishiba, Shigeru, an apparent contender of Mr.Abe of prime ministership. Since then, Ms. Koike has been left without any meaningful role within LDP. With this background, she opted to run for Tokyo governorship.

   LDP accused Ms.Koike and nastily disturbed her, for example, by ordering all the members and their families of Tokyo district LDP not to support Ms.Koike in gubernatorial election with even punishments. This kind of order could not have been issued without the endorsement of Mr. Abe himself.  Even under such circumstances, Ms.Koike dared to run for election keeping her LDP membership without formal recognition by LDP. And she won the election by the land-slide victory against the LDP supported candidate. After the victory she gave her LDP membership away.

  She started Tokyo metropolitan administration faced with the assembly which was dominated by LDP. LDP members have been antagonistic against Ms.Koike.Ms. Koike kept criticizing the untransparent behavior and behind the scene deals of old assembly bosses of LDP. Preparing for July 2017 Tokyo Metropolitan assembly election, she established a new party entitled “Tokyo Citizens First, “ and achieved a land slide victory occupying the majority of the assembly by this new party. In contrast, the so far majority party of LDP tumbled down to a minor opposition party.

   Some of her close supporters in the national Diet have been attempting to create a national level party, temporary called “Japan First Party.” This campaign attracted a few Diet members who included members of Democratic Party of Japan. Ms. Koike participated to the campaign as an advisor. On September 24, Ms.Koike arranged a press conference and gave a surprising declaration saying that “I will reset the movement for the new party. I will establish a new party, named “Hope” and will be the leader of the party.”

   Her declaration gave a powerful impact to political community, particularly, DPJ. Following her abrupt statement, Mr. Seiji Maehara stated in general meeting of DPJ that DPJ will join the movement led by new party “Hope” and asked the members to agree the resolution to join. The resolution was unanimously agreed.

   Ms. Koike welcomed the resolution of DPJ. But said that she will not necessarily welcome all the members of DPJ and added that she will only accept those who will agree with the basic policy stance of “Hope” party. She said she will prepare a “rejection list” and will reject those DPJ members who will obviously not join the basic policy stance of Hope party. The rejected members are known leftists. Because of this distinction or discrimination, DPJ had to dissolve automatically.

  This action of Ms. Koike shocked not only those DJP members who were discriminated against, but also the general public. The leftist members, having lost the place to go, decided a few days later to establish a new party entitled “Constitutional Democrats,” led by Mr. Edano Yukio. Within the following few days,  some 50 Diet members got together. The new party declared to go together with Communist party and bring together those who oppose against conservatists and change of the constitution. The new party of leftists has reportedly attracted unexpectedly broad attention and sympathy of the public.

   Toward October 10, the opening day of election campaign period, Ms.Koike attracted nation-wide attention as to whether or not she will run for the national election. If she does, she will have to give up the governorship. She kept saying that she will continue to serve as the governor. But some observers have kept predicting that she would run for the national election on the ground that she saids clearly the critical motivation for her current campaign is to terminate “Abe only one politics.”   

   Mr. Shinjiro Koizumi, a young leader of LDP and a son of legend ex-prime minister Junichiro Koizumi, criticized Ms.Koike saying that she is irresponsible in dual senses in either way. Irresponsible to run for the national seat because she will have to abandon Tokyo, and irresponsible to remain as a governor because she will keep the position of national party leader to split her energy.

   I have a view that Ms.Koike did a great job to give an awakening shock to members of opposition parties because opposition politicians and parties have been only criticizing for years Abe administration for very low level personal scandals or trifle drawbacks of politics, and have never proposed substantive and creative alternatives. As a result of the blow by Ms. Koike, DPJ has been virtually cut into two parts: more conservative and more left wing. In Japanese media, left wing politicians are called “liberals,” which is totally inappropriate. They are not liberal in any sense of its true sense of the word. They are simply outdated leftists.

   Thanks to Koike’s impact, the land scape of Japanese politics has changed drastically. It used to be the bi-polar structure of a single overwhelmingly powerful segment led by LDP together with Komei party and a group of weak and small opposition parties. Now, the picture consists of three groups: one is the group of parties in power consisting of LDP and Komei, next is the second conservative group consisting of “Kibou” and “Ishin” parties, and the third is the leftist group consisting of Communist party and Constitutional Democrats. The real landscape will be determined by the result of the forthcoming election of October 22.   

   I would like to discuss here about a very important challenge that Japan will be faced especially in the aspect of economic policy.

   Abe camp claims that, after the victory of the election, the administration will make use of increased tax revenue of additional 2 percent of consumption tax, which is estimated to be about 5 trillion yen a year, enrich social security and education. More specifically, enrich the social security system to cover not only the traditional beneficiaries of aged people but also to take care of basic needs of all the generations of the society, and provide free education for those who need financial assistance covering from kindergarten up to high schools, including private high schools, and provide grant-type scholarship to college students. Such policies are certainly meaningful and necessary for Japan for the years to come. However, these are only parts of more comprehensive policy system which needs to be constructed for the future. I will comment on this point later.

  The second conservative group consisting of “Kibou” and “Ishin” parties claim that they will freeze for sometime the increase of consumption tax rate because people are not confident enough to accept such increase of their burden, instead of increasing consumption tax, they propose to levy tax on huge amount of internal reserve of business companies which is estimated as much as 300 trillion yen,  abolish nuclear power generation for obvious danger, and introduce “basic income” system.

   These proposals look certainly catchy and may well attract attention of voters. However, the critical question is how to finance such policies. Postponing consumption tax increase will cost huge amount of increase of fiscal debt every year. Imposing a tax on internal reserve may not yield desired tax revenue, and if imposing a very heavy tax, businesses may shift their resources out of the country. Introduction of basic income will also cost a lot. In addition, although I personally agree to abolish nuclear power generation, the abolishment will also cost a lot both the abolishment itself and generating alternative energies.

   Even though the time for planning policies this time has been extremely limited, the problem is that there seems to be little effort to locate all these policies in an integrated system to examine the total feasibility and outcomes of operation of all such policies. Lacking the check of internal consistency and cost accounting, voters may not feel confident to rely on such catchy policy proposals.

   Leftist group criticizes political posture of prime minister Shinzo Abe harshly, and oppose any changes in Japanese constitution. However, they criticize the administration for the sake of criticism and offers no positive alternatives.

   Let me get back to the point that the outstanding new policies proposed by parties in power of LDP and Komei are just a part of policies which need to be located in a more comprehensive social system of Japan in the near future. All the generational social security system and free education are certainly useful and necessary policies. But they are part of an integral total societal system to support life of entire people in the near future.

   Let me explain why it is so. The current social security system composing of old age pension, medical care, unemployment benefits, and poverty support system was constructed in the early 1960s. It was the time when Japanese economy was growing rapidly, it also was enjoying rapid population growth, a large pool of young labor force, most of families were composed of parents and a few children. With rapid economic growth and a abundant supply of cheap young labor force, corporations increased production by employing young workforce, train them within the firm and increased productivity. Such practices gave rise to de fact life long employment for all workers and length of service reward system, known by “Japanese style” employment system.

   Under such circumstances, earners of families were full time employees and wives are basically concentrated in raising children. To support such a society, the conventional social security system which comprised of old age pensions for the retirees, and medical care for those who need it, and unemployment benefits for whom just lost jobs temporarily, and poverty support for those who are disadvantaged for some reason does just suffice.

   The structure of Japanese economy, society and families, however,  have changed drastically, particularly during the 20years lost decades for 1990s and 2000s when Japanese economy has not grown in any substantive degree. Business corporations, which were not vigorous enough to keep all the employees full time increased proportion of part-time and subcontracted workers. The proportion of non regular workers was about 10% of total workforce in 1990 increased up to nearly 40% in 2010s. The proportion of families with parents and children was about 2/3 is now less than 40%. Since house wives of most families now have to work to earn the living, they cannot take good care of education of their children. In other words, Japanese society is suffering from serious weakening of the capacity of reproduction of population.

   Given such circumstances, the new type of much more comprehensive social security system covering not only aged retirees, sick people, unemployed but such phases of people who badly need help such as young males and females who wish to marry, those who want to have children, those who need child care, those who foster and educate children, those workers who need to have employment benefits and protection. Election slogans of LDP such as all the generation social security system and free education need to be located, examined and discussed in these contexts. Unfortunately, almost no serious policy discussion of in such context has ever been heard in this election.

   On the top of this, the most critical question to be discussed in election is how to finance such a system. The new comprehensive social security system will need at least twice as much budget to run the system compared to the conventional system. How to finance it? 

   Japanese administrations including Abe administration have been relying on issuing ever greater amount of government bonds, which mushrooms accumulated government debt as much as 242% relative to GDP, an unprecedented level in the human history. Such a monasterial accumulation of government debt may well incur fiscal and economic destruction with any external shock. Moreover such debt created by a massive borrowing by government bonds is an extremely unfair burden on future generations. Sadly and curiously, no serious discussions were heard of these issues in the policy debate, if any, in this election.

   In order to reduce the unfair burden on future generations, we may think of increasing income tax, social security premiums or consumption tax. Increase of income tax will squeeze ever shrinking working population, increase of social security premiums will also suppress declining work age population, which will end up weakening and wrecking Japanese economy. Perhaps the only less damaging means is to increase consumption tax which is fairer than other taxes  and also increase tax base widely for inheritance tax. In my judgement, Japan needs to increase consumption tax up to 20% and keep it there for half a century to finance such a comprehensive social security system and reduce government accumulated debt. People may accept such tax burdens only if they can trust the government, country and community that they provide complete care and security of their lives for free in turn for their tax burdens.

   Abe administration’s tax scheme is much too much meager relative to the need of the nation. The “Kibou” ’s proposal to freeze consumption tax increase is reckless in this context. Am I the only one who feels very sorry that discussion of the most serious and pressing issue which the country will face is lacking in the policy debate of this election?

 
 
 
 
 
 

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