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Tuesday, April 1, 2008
Cost at pump to drop until April-end vote
By MASAMI ITO
Gasoline prices are set to fall by ¥25 per liter after the ruling bloc and opposition camp failed to agree Monday on extending provisional extra levies on gas and other auto-related taxes.
The Diet, however, approved a stopgap bill to maintain until the end of May various other special tax measures that would have expired Monday, the final day of fiscal 2007. This step was also part of the government's original tax package.
"The moment has finally arrived when we can (meet the public's expectations for) lower gasoline prices at a time when (the cost of) everything else is rising," said Yukio Hatoyama, secretary general of the Democratic Party of Japan, the top opposition force.
Prime Minister Yasuo Fukuda apologized for not being able to resolve the political deadlock and for the subsequent confusion it has caused in local economies and among the public.
"I would like to apologize from the bottom of my heart (because) the public will now have to pay for (the Diet) failing to resolve (the gasoline price issue) politically," Fukuda said during a news conference.
Desperate to curb the sinking support rate for his Cabinet, Fukuda and the Liberal Democratic Party-New Komeito ruling coalition spent all of last week trying to negotiate with the opposition parties to maintain the provisional auto-related tax rates.
But the DPJ, the main opposition party, refused to budge, arguing for the abolition of the special tax rates to lower gasoline prices.
With the Diet divided because the opposition camp controls the Upper House, Fukuda's efforts ended in vain — striking another major blow to his Cabinet.
"It is easy to campaign for lower gasoline prices to gain popularity," Fukuda said. "But without a firm vision, we would just end up making our children and our grandchildren pay in the future. I would like to ask (the public) to maintain the provisional tax rates for the nation and for the future of our children."
The ruling bloc can still force the prices back up at the end of April with a second vote in the Lower House, where it holds a comfortable majority, thereby overriding the rejection of the Upper House.
Although Fukuda refused to clarify during the news conference whether he will call for a second vote, he issued a statement in which he said, "I have made up my mind to do everything in my power to secure the maintenance of (the provisional rates) without delay."
Under Article 59 of the Constitution, if the Upper House rejects a bill or does not vote on it within 60 days after it is sent from the Lower House, the lower chamber can hold a second vote and enact it with a two-thirds majority.
Fukuda also said he ordered relevant ministers to come up with measures to minimize the damage caused by the termination of the auto-related taxes.
The temporary drop in gasoline prices will be a blow to local governments because they will lose an important source of revenue.
And some gas station operators will face losses because to compete with their rivals they will need to start lowering prices from Tuesday on fuel that they bought earlier at higher rates.
The ¥25 per liter gasoline tax was levied when oil wholesalers shipped the oil. Therefore, retailers will have had some gasoline already shipped in March, before the provisional tax was abolished Monday.
"If the government understands how the public feels, it should realize that raising (gas prices again) is out of the question," the DPJ's Hatoyama said.
"If the government chooses to ignore the public's (needs) just for the sake of the government's financial situation, (the DPJ) will have to stand by the public and take thorough action."
Hatoyama added that his party may consider submitting a censure motion against Fukuda in the Upper House.
The government and the ruling bloc have argued that without the revenues from the extra tax rates on gasoline and other road-related levies, the government will see a ¥2.6 trillion annual shortfall.
During his news conference, Fukuda also pointed out that the international trend has been to increase taxes on gasoline to curb carbon dioxide emissions and reduce global warming.
Fukuda stressed that gasoline prices are ¥250 per liter in Britain and ¥220 in France and Germany.
"If Japan were to lower gasoline prices by ¥25, it would become ¥125 per liter, half of that of Britain," Fukuda said. "We could be sending out the wrong message to the world taking measures against global warming that Japan is trying to increase gasoline consumption."
Meanwhile, the stopgap bill was approved after the ruling bloc and the opposition agreed to minimize the chaos resulting from the divided Diet's failure to enact the government's tax bill in time for the Tuesday start of the new fiscal year.
The stopgap bill extends the special preferential rates on taxes on sales of used cars and land as well as import duties on whiskey and cigarettes brought in by travelers.
It also maintains tax breaks on financial transactions on the Tokyo offshore market, for which financial entities draw funds from overseas and manage them in markets abroad. Interest on funds deposited in the institutions in the Tokyo offshore market has been tax-exempt.
About ¥20 trillion in funds are currently managed in the market by financial institutions in Japan with fewer restrictions on taxation and interest rates.
Ending the preferential treatment would probably prompt foreign investors to move their capital to other markets.