D-Day for the Consumption Tax?

Having hammered out a tentative deal with the Komeito and the LDP in regards to the rise in the consumption tax, and an overarching framework for the reform of social security spending, Party Secretary-General and the DPJ’s policy chief Seiji Maehara today go into today’s crucial session (日) of the DPJ’s Party Research Council to ask for agreement on the 3-party deal.

Noda is currently on his way to the G-20, but despite having managed to acquire Komeito and LDP agreement on tax reform, he will not be resting easy. Noda has been working on the assumption that if need be he could go ahead with the deal and submit it to the Diet in the current parliamentary session even if the Ozawa group opposed. As long as he made appropriate looking overtures, he could handle Ozawa group opposition as long as he had LDP and Komeito support. Indeed success in passing it under such adverse circumstances would demonstrate Noda’s “political leadership” and with Ozawa’s star even further on the wane than usual due to some (as yet unverified – Shukan Bunshun after all) accusations (E) about what he was doing around the time of the Fukushima incident’s escalation, then he probably figured that he may be able to live – and may even benefit- from an Ozawa internal party insurrection in this context. This is of course as long as any disciplinary measures (such as expulsion) did not reduce the party’s lower house numbers below the magic 240 mark.

However in negotiating with the LDP and Komeito, Noda has had to make a number of concessions that seem to eliminate for once and for all the DPJ’s original 2009 election manifesto as a salient policy document guiding the DPJ. Up until now the DPJ has time after time had to make concessions on the big policy promises it made in its manifesto, but some of these were seen to be excessive promises in the first place. Some, such as the guaranteed minimum pension policy, however, were seen as one of the few remaining policies they DPJ could point to in terms of responsible election promises.  However the Komeito and the LDP have used their leverage in current negotiations to expunge from the legislative record any hint that the DPJ is a principled party, with an eye to any upcoming election.

Again, if this was to anger only Ozawa and co. then Noda probably calculated that he could get away with it. However, the “middle-roaders” in the DPJ are starting to express misgivings about what this means for the viability of the DPJ as a party. It may in the short to medium term give a boost to Noda’s individual fortunes, but it will probably put the final nail in the coffin for the DPJ’s attempt to portray itself as a party of reform. The opinion of the “middle-roaders” will become the focus of today’s negotiations and debate within the DPJ and it is by no means a forgone conclusion that they will agree to the negotiated deal.

Depending on the outcome of today’s joint session, which is predicted to go into the evening, a number of things will be of interest.

In the best case scenario for Noda, if he is able to get all but the Ozawa’s group sign-off, he may then be able to submit the legislation to parliament on June 21st as promised (or thereabouts now that the session will definitely be extended (日)) . This would be seen as a big victory for Noda – something the LDP and Komeito may ‘perversely’ be quietly hoping against.  Attention will then turn to the electoral reform bill, with the latest incarnation (if you care about the details ask me in the comments) having very mild Komeito support. The LDP has said it will not support this bill but it seems that the DPJ might go ahead and put it to a straight up and down vote anyway. The Komeito and ultimately the LDP may come around and vote for this as, ultimately, their ostensible motivation for negotiating with Noda on the social security and tax bills is to extract an early election from Noda, technically constitutionally problematic as of this moment. Without this legislation Noda can put off an election indefinitely.

However Noda may try and ride out calls for an election as long as possible. Passage of the tax bill will strengthen Noda in the near term, and this is even without having to promise an election which at one point looked like an absolutely essential compromise for the DPJ to make in order to gain LDP/Komeito support. The reason for this is of course the Hashimoto dynamic, and fear of what the Ishin no kai might do to the LDP’s support base in an election, pushed the LDP/Komeito towards engaging with Noda and the DPJ mainstream. As long as Noda can minimize the impact of an internal revolt, and survive the September DPJ presidential election, he may even be able to last until 2013 and the “double election.” While he will not be able to appeal to the ‘reformist’ narrative, if he can keep cabinet misdeeds and scandals to a minimum he may be able to appeal to the Japanese public as an example of gritty “leadership” and “responsibility.” The focus thus will be on whether the LDP or Komeito can maneuver Noda into calling an election before the end of 2013, and before he builds too much of a “success” portfolio in the interim.

If Hashimoto et al can be placated with the legislation he wants for the “Osaka-to” concept, and thus refrains from making an entrance into the national political scene, as he has suggested he may, then the LDP and Komeito may become much bolder in pushing the DPJ towards an election. Thus expect the LDP and Komeito to focus on this particular piece of legislation if Noda is able to get his way with the consumption tax rise. In this scenario, the DPJ party leadership, made up of the “mainstream” faction (Noda, Okada, Maehara, Sengoku etc), and the LDP/Komeito combination may well be in a post-election situation of (having to) forming a grand coalition. Or so the LDP in particular seems to hope (日). For the LDP and Komeito, they will likely be strengthened in any election that does not feature Hashimoto or other reformist elements, although it is unlikely that they will acquire a majority. However the LDP from their point of view may likely get hold of the PM position in any grand coalition and other cabinet goodies that they are currently denied. This will be, in my calculations, despite Noda and the DPJ faring better in any election from having his “leadership” credentials burnished, even if the policy and ideological content of the DPJ vanishes.

My bet is on Noda putting off an election for a period of time. We also need to factor in the LDP’s own internal party unity that may become an issue if the consumption tax bill is passed, which may limit their own influence and capacity to call for an election. There is also the fact that many in the LDP would likely want to wait until after the LDP’s own September election to push for a general election, as that might, in their calculation, give whoever is victorious a shot at the party leadership (Tanigaki will have to step down if he is unable to secure a DPJ promise for an early general election by September), and as identified above, and also put them in pole position to attain the prime ministership.

However if the “middle-roaders” reject the current negotiated deal today and are unable to be brought around by June 21 when Noda gets back, or at the very least this Diet session, then things will remain murky.

What we do know is that this will require Noda putting off a vote on the tax bill and going back to negotiations with both the LDP/Komeito and DPJ recalcitrants.

Noda will then likely also have to face a no-confidence vote as the LDP and Komeito have promised to submit one if Noda is unable to bring his party into line and deliver the votes for the passing of the tax and related legislation on 21 June or thereabouts. The LDP/Komeito will likely not tolerate internal bickering in the DPJ for very long. Then the focus will be on whether the DPJ still pushes forward on the electoral reform bill that is required before any constitutionally valid lower house election can be held. In their heart of hearts the LDP and Komeito will be hoping that Noda fails with the DPJ intra-party negotiations and has to either call an election in response to a no-confidence motion passing, or quit the party leadership due to his failure to honor his pledge to raise the consumption tax in the current parliamentary session, or both. In this scenario the DPJ will be dead in the water as a vehicle for electoral success. The DPJ mainstream will be discredited as both a ‘pragmatic’ leadership as well as a policy reform voice in Japanese politics, while Ozawa and anyone associated with an Ozawa breakaway group will also have a hard time making a case for election.

However the LDP with the support of Komeito in single member districts may even be able to acquire something close to a lower house majority as any legislation passed to reform the system will likely reduce the number of proportional representation seats, which will undermine the influence of the minor parties.

The wild cards are still Hashimoto and the Ishin no kai, and in particular what the middle roaders in the DPJ will do in reaction to whatever outcome arises from today’s joint session. The Ozawa and middle wings of the Ozawa will be cognizant of the LDP/Komeito’s strategy around these negotiations. The middle-roaders may end up going along with the tax rise as the lesser of two evils in terms of their likely electoral fate, although it may well be bad either which way. They may perceive that they have a fighting chance with Noda if they think he can last until 2013.

Or  they may take a risk, in which case it will come down to whether they will breakaway but also distance themselves from Ozawa, and possibly hook up with other reformist political actors in the system, including the likes of Hashimoto and the Ishin no kai. Ozawa has recently come out and suggested that, much like Tanaka Kakuei did when he was going down in the 1970s, his people could use him as a punching bag for electoral gain, although one wonders whether Ozawa would be so generous as to both fund such a group and at the same time shelve his pride.

My own prediction is that the middle-roaders and even some in the Ozawa group will go along (or possibly abstain) with the Noda bill simply because it allows them to live to see another day, assuming Noda is not pushed into declaring an election any time soon. If they calculate that Noda can put back an election they may then start to think about how to cultivate an alternative vision for the DPJ or any spin-off party that could help them fight against an effective grand coalition ‘bogeyman’ in 2013 of the LDP, Komeito, and the ‘DPJ mainstream.’

What will be of interest is which policy issue will the Noda cabinet pursue next? The tax rise will be a temporary victory only – Noda surely understands that he will need more achievements before facing the electorate later this year or in 2013. The TPP 6 months ago would have been odds-on, but now seems an outside bet as it appears that it the TPP is being hamstrung both by opponents at home as well as by US commercial interests who as time goes on are making joining the TPP even more unappealing for Japan . Perhaps a new energy strategy or energy sector reform based on reduced but not eliminated nuclear reliance?

One thought on “D-Day for the Consumption Tax?

  1. Pingback: Noda Still on Track for a June 21 Vote on the Consumption Tax? | σ1

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