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Tuesday, April 10, 2012
Issues Mr. Noda must tackle
The ¥90.33 trillion fiscal 2012 budget was enacted April 5. If a special budget for the reconstruction of areas hit by the 3/11 triple disasters is included, its size expands to ¥93.55 trillion. Because the budget failed to be enacted by March 31, the end of fiscal 2011, the Noda administration had to adopt a provisional budget — the first such budget in 14 years. Although it only had to cover six days, this shows that the administration's political foundation lacks strength and that the opposition forces have not let up their offensive against the Noda Cabinet.
The opposition-controlled Upper House on April 5 rejected the budget. After a consultative body set up by the both chambers of the Diet failed to reach agreement, the Lower House's vote on March 8 to pass the budget overrode the Upper House's vote in accordance with constitutional provisions.
Although the fiscal 2012 budget was enacted, the Noda administration still has another hurdle to overcome. The budget depends on deficit bonds for 42 percent of the revenues. But the bill to authorize the bond flotation is still pending in the Lower House due to resistance by opposition forces. Without the bond flotation, the government cannot fully execute the budget. Since the budget has been enacted, the opposition should cooperate with the ruling bloc so the budget can be put into operation as smoothly as possible.
Now that the budget has been enacted, Mr. Noda is eager to press on with his plan to raise the consumption tax from April 2014. But given the fact that Japan has been suffering from deflation for years now, and that income and resident taxes are being increased to finance reconstruction efforts, he should realize that the planned tax hike could kill the Japanese economy. He also should remember that the tax hike plan is part of tax and social welfare reform. In his haste and eagerness to raise the consumption tax he has neglected to present a clear vision of how Japan's social welfare system will be stabilized in the future.
The Noda administration must urgently push a number of bills through the Diet after the budget is passed, including legislation to establish a Nuclear Regulatory Agency, to change the postal service privatization scheme and to reapportion seats in the Lower House. The prime minister is eager to reduce the number of Lower House seats to make it appear that the government is making efforts to slash costs at the same time it is asking the public to shoulder a consumption tax hike. But such pseudo-reform would only serve to suppress minority opinion.