Tuesday, June 26, 2012

About that Consumption Tax thing...

I've written here previously (various comments as well) about the Noda naikaku (cabinet; administration)'s remarkably ill-considered plans to raise the Consumption Tax (a.k.a. Sales Tax) from 5% to 10% over three years...

***Caution: baseball reference follows***

Well, here's the wind-up... (Mainichi News) (BBC)

...and the pitch.

It's a long fly ball... it's well hit... it looks like it is going... going...

But, before anyone signals a 'home run', I've got a couple of things to point out:

Yes, 363-96 in the Lower House is a crushing success for the ruling party. But they only got there by getting what's left of the Liberal Democratic Party (Jiyuu-minshutou; LDP) to join in support... so much for being the Opposition... and the minor LDP-allied welfare-loving New Komeito (Shin Koumeitou; NKP; the name is no longer related to its literal meaning) as well.

Voting against *their own party* was the Ozawa Faction (roughly 50 strong) of the Democrats (Minshutou; DPJ), where the always opportunist Ozawa Ichirou (I. Ozawa) saw a chance to get on the populist side of the vote. OK, he's still not one of the good guys... but he's on the side of right for his own reasons this time.

However... There are still three ways (at least) that this bill can die.

Big #1: Ozawa leads his faction out of the DPJ and forms a new party in Opposition. This, if 54 Representatives leave the DPJ, would put the Noda administration in a minority in the Lower House. That is an opportunity that not even the recently-pathetic LDP could resist. No-Confidence; Down comes the government; New elections called. Any bill pending dies with the session end.

#2: The vote was yesterday, local time. If this morning the sun comes up and every LDP Representative finds his e-mail and voice-mail queue filled with outraged calls from constituents, it would be shall-we-say more difficult for LDP Party HQ to order strict party compliance with the support agreement. Without that order, when the bill comes up in the Upper House (where the Democrats lack a majority) it might get sent back. Or the debates might be long, nasty and inconclusive. Sent back means the Lower House has to marshal a supermajority (2/3) to bulldoze the bill through. That, without a party order binding LDP Lower House Representatives (who face the next election fairly soon, snap or scheduled), is unlikely to get the same votes the bill did this time. No supermajority, the bill dies.

#3: Even if LDP Party HQ orders a line vote in favor... there just aren't that many LDP Reps left with totally secure seats. While #2 above is based on purely public outcry (also, read the big papers in the morning and see if the major media joins the outcry), the real support base for the remaining LDP strongholds is in the power of local supporting associations. Interest Groups. Business and Agriculture Interest Groups. How many of them are feeling "understanding" about this whole matter? How many of the leaders of such groups are thinking of making a few calls around in the morning... maybe to a Small-Government Low-Tax Party like "Your" Party (Minna no tou; Everyone's Party; once a LDP renegade effort, now a rising party in its own right)? Just one or two major supporting associations in a given electoral district signalling such displeasure would put the Fear of God, er fear of unemployment in the local Representative. Suicidal loyalty to one's party being quite the past thing here in Japan, some large number of Reps under such pressure can be expected to either miss the vote or go against the LDP leadership... losing one's party affiliation isn't career ending (cf. Suzuki Muneo, darn him)... losing one's supporting associations is.

So, yeah, it's bad. If I were to pick the one thing that would further depress consumption in the Japanese economy and feed the deflationary spiral, it would be just such a Consumption Tax increase as is moving through the Kokkai (Parliament) right now.

Whether that "long fly ball" is a home run for the Noda administration, or a long out caught at the wall, remains to be seen.

But the outfielder is going to have to climb the wall to bring this one back, I think.

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