To become law, bills need to be passed by both the lower house and the upper house.
Despite Noda’s strong intention to push reforms, a consensus has not been reached on tax issues inside the DPJ. Besides, following the upper house election of July 2010, the DPJ lost its majority in the upper house and needs to cooperate with opposition parties to pass bills. Although the LDP agreed to raise the consumption tax rate, it has been looking for opportunities to dissolve the Diet for elections and insists that the lower house must be dissolved before the submission of the bills to obtain the voter’s mandate.
Prime Minister Noda realizes that there is opposition from within his party and also from opposition parties. To reduce the intra-party conflict gridlock and increase the likelihood of passing the consumption tax-related bills as much as possible, he said that he will listen to different opinions and take them into account.
In terms of the relationship with his own party, Prime Minister Noda indicated that he would like to “collect” the opinions of ruling parties, i.e. getting “the party” back to policy-making to some degree. Right after assuming office, the DPJ abolished the policy affairs research council and other party policy bodies such as the DPJ’s tax commission. This is because the DPJ proposed to establish a system where politicians are in charge, i.e., only ministers, senior vice ministers and parliamentary secretaries of government ministries work on policies on their own. For example, in the case of tax-relevant issues, the Hatoyama Cabinet created a government council on the tax system, headed by the Finance Minister and consisting of ministers and senior vice ministers only. Originally, the DPJ intended to downplay the role of bureaucrats and, as a result, DPJ diet members who were not political appointees/not part of
government were almost entirely excluded from the policy-making process. Since their opinions were rarely taken into account, “anti-Cabinet” sentiment rose.
Consequently, even DPJ diet members did not support the Hatoyama Cabinet’s bills.
This is why the rate of passing bills during the Hatoyama Cabinet was so low. After Hatoyama stepped down, Prime Minister Kan re-established the PARC but the party side still did not play an active role. By contrast, Prime Minister Noda re-launched the DPJ’s tax commission and even appointed people who did not support an increase in the consumption tax to the commission to reduce the possibility of intra-party tension.
Only “listening” to different views cannot help Noda to push his own agenda. Unlike Prime Minister Kan who chaired several commissions but did not play a role in coordination, Prime Minister Noda has taken advantage of his authority as prime minister to set up his agenda and has appointed the same person (Motohisa Furukawa) to be the Minister of National Strategy and Minister of Economic and Fiscal Policy, in an attempt to centralize the decision-making body to decide what Japan should pursue in terms of economic and social development.
However, Prime Minister Noda’s popularity has not helped him to create a mandate to get his own party and other parties on board. Somewhat unexpectedly, he took a bold move, announcing an increase in the consumption tax at the G20 meeting. By doing so, Prime Minister Noda has made an international commitment. Since he made such an announcement at the international conference, it was not him but
“Japan” that made the commitment. He wants to use this international pledge to force his party and other parties to honor “Japan’s” commitment to the global economy. In other words, he is creating the first mover’s advantage to force other actors to follow and thereby weaken domestic opposition.
It is risky for Noda to put his position at stake to push reforms. However, the public may appreciate his courage. First, Noda is showing that he is taking leadership to champion unpopular but critical issues. Second, he is showing that he will take responsibility for this unpopular policy. He has made it clear that, regardless of whether or not the opposition supports his bills, he will submit bills specifying the timing and rate of the consumption tax hike to the next ordinary Diet session in early 2012. Besides, he has also made it clear that he will dissolve the lower house when the legislation is passed. Implicitly, if the public is not happy with the tax hikes, he may leave office.
Over the past several years, the Japanese public has been dissatisfied with the lack of
leadership. Thus, Noda’s positive attitude may reward him.2 Even though, by nature, raising taxes is not a popular policy, the public may appreciate Prime Minister Noda’s courage and he may end up doing well. It is not clear how the DPJ, the LDP and other opposition parties will respond to the Prime Minister’s move. However, one thing that is for sure is that he also needs to sell the importance of raising taxes to maintain the social welfare system to the public. In particular, in addition to social welfare and tax reforms, there are many issues Prime Minister Noda needs to deal with, such as the Trans-Pacific Partnership (TPP) negotiation, and strong yen and etc . Given limited time, without public understanding, Prime Minister will not be able to push his agenda.
According to a series of polls conducted in September and November by Yomiuri Shimbun and Asahi Shimbum, there is no majority view on the increase in the
consumption tax rate. The number of supporting tax hikes is almost the same as that of opposing tax hikes.3 Although it is widely agreed that an increase in taxes is critical to maintain Japan’s public finance and social security system, people may not sense the urgency and are ready to pay higher taxes now. The government is
responsible for explaining to and convincing the public why higher taxes are needed.
In particular, the costs of welfare policies, i.e., how money will be used, should be clarified.
2 For example, the public is split on whether or not Japan should join the Trans-Pacific Partnership (TPP) negotiation. However, Noda’s attitude toward pushing TPP has recently received positive evaluations.
3 In a poll conducted by Asahi Shimbun in August 2011, 44 percent of respondents supported tax hikes and 45 percent opposed tax hikes. In a poll conducted by Yomiuri in November 2011, 47 percent of respondents supported tax hikes and 48 percent opposed them.