This week the Japanese Diet will continue the prolonged (and somewhat tortuous) negotiating process aimed at securing the passage of Prime Minister Yoshihiko Noda's consumption tax rate increase legislation through the lower house. This particular legislation has been debated between the DPJ and the LDP/Komeito opposition for nearly five months (or if one considers former PM Kan's advocacy of a consumption tax hike, two years), and has seen PM Noda modify his initial position to one that virtually echoes the LDP's own stance - i.e, that the tax rate would be increased from its current level of 5% to 8% in April 2014, and then up to 10% the following year. In order to get to this point, Noda has dismissed members of his own cabinet at the behest of the opposition, spent hours in negotiations on details, and now faces the possibility of having to make further compromises on pension funds and other social security payments (not to mention the full revocation of the DPJ political manifesto) so that the legislation passes both houses by the end of the parliamentary session on June 21.
As has been pointed out elsewhere, this entire process is typical of the type of political impasse that had plagued the Japanese Diet for the best part of a decade. Internal factional disputes, so typical of the LDP, have permeated the DPJ to the extent that the two parties have become mirror images of one another. Three years ago, hopes were that the arrival of the DPJ and the implementation of their manifesto would bring about the seachange in the Japanese political landscape, overturning years of LDP leadership stagnation and a blunt refusal to tackle the economic problems that were hampering Japanese competitiveness abroad and contributing to the stagnation of the domestic market. Such hopes have long since faded, not helped of course by the loss of a majority of upper house seats by the DPJ in the July 2010 Senate election, resulting in what is referred to as a "twisted parliament' (ねじれ国会), where the DPJ controls the lower but not the upper house, leading to an inability to pass legislation without p opposition parties.
Such is the level of discord within the DPJ that at the same time as facing off against the opposition, Noda also has to face his own internal rivals in the form of Ozawa Ichiro and his factional supporters. Ozawa is opposed to any form of consumption tax increase, and has made it clear in previous policy outlines and books that he sees a need for a fundamental re-structuring of the bureaucratic apparatus in Japan and a revision of budget priorities instead of single-mindedly pursuing tax increases. At this point, while Ozawa may oppose Noda's stance, he is not in a position to change it, having only just been readmitted to the DPJ after having his membership suspended following allegations of violations of party financing law by members of his office. While Ozawa supporters (who outnumber Noda's faction) might attempt to work against Noda's legislative proposals to the opposition, which in turn undermines confidence in the legislation both within and outside the party, Noda holds the trump card of being able to call an election and is using this threat in negotiations with the opposition to keep disgruntled members of his own party in check.
Given this state of affairs, the possibility that Noda's tax reform legislation will pass before June 21 is growing progressively more remote, although its defeat is not yet a fait accompli. As to what level Noda will be forced to make compromises is not yet clear, but the opposition is taking every advantage of the situation to force Noda into making more complex decisions (in terms of their compatibility with DPJ policies). If a general election results from either the passage or rejection of the legislation, this does not automatically guarantee political realingment (although a loss in a general election by the DPJ may result in the party splintering into pro and anti tax and bureaucratic reform factions and the formation of new political entities), neither does it mean that the economic reform process that is so necessary for Japan's future will be pursued with vigour in the Diet. However, as Jared Diamond has pointed out, at various points in Japan's history, when things have seemed dire, there has been an overwhelming societal push for reform and revitalisation. The question is; how dire do things have to get before Japan seizes the opportunity for reform? Given recent history, one has the sinking feeling that the process of political atrophy has not yet reached crisis point, and that there is still some way to go before circumstances force a tangible change to occur in either Kasumigaseki or Nagatacho.
As has been pointed out elsewhere, this entire process is typical of the type of political impasse that had plagued the Japanese Diet for the best part of a decade. Internal factional disputes, so typical of the LDP, have permeated the DPJ to the extent that the two parties have become mirror images of one another. Three years ago, hopes were that the arrival of the DPJ and the implementation of their manifesto would bring about the seachange in the Japanese political landscape, overturning years of LDP leadership stagnation and a blunt refusal to tackle the economic problems that were hampering Japanese competitiveness abroad and contributing to the stagnation of the domestic market. Such hopes have long since faded, not helped of course by the loss of a majority of upper house seats by the DPJ in the July 2010 Senate election, resulting in what is referred to as a "twisted parliament' (ねじれ国会), where the DPJ controls the lower but not the upper house, leading to an inability to pass legislation without p opposition parties.
Such is the level of discord within the DPJ that at the same time as facing off against the opposition, Noda also has to face his own internal rivals in the form of Ozawa Ichiro and his factional supporters. Ozawa is opposed to any form of consumption tax increase, and has made it clear in previous policy outlines and books that he sees a need for a fundamental re-structuring of the bureaucratic apparatus in Japan and a revision of budget priorities instead of single-mindedly pursuing tax increases. At this point, while Ozawa may oppose Noda's stance, he is not in a position to change it, having only just been readmitted to the DPJ after having his membership suspended following allegations of violations of party financing law by members of his office. While Ozawa supporters (who outnumber Noda's faction) might attempt to work against Noda's legislative proposals to the opposition, which in turn undermines confidence in the legislation both within and outside the party, Noda holds the trump card of being able to call an election and is using this threat in negotiations with the opposition to keep disgruntled members of his own party in check.
Given this state of affairs, the possibility that Noda's tax reform legislation will pass before June 21 is growing progressively more remote, although its defeat is not yet a fait accompli. As to what level Noda will be forced to make compromises is not yet clear, but the opposition is taking every advantage of the situation to force Noda into making more complex decisions (in terms of their compatibility with DPJ policies). If a general election results from either the passage or rejection of the legislation, this does not automatically guarantee political realingment (although a loss in a general election by the DPJ may result in the party splintering into pro and anti tax and bureaucratic reform factions and the formation of new political entities), neither does it mean that the economic reform process that is so necessary for Japan's future will be pursued with vigour in the Diet. However, as Jared Diamond has pointed out, at various points in Japan's history, when things have seemed dire, there has been an overwhelming societal push for reform and revitalisation. The question is; how dire do things have to get before Japan seizes the opportunity for reform? Given recent history, one has the sinking feeling that the process of political atrophy has not yet reached crisis point, and that there is still some way to go before circumstances force a tangible change to occur in either Kasumigaseki or Nagatacho.
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