Opposition over Tax Hike Rescheduling

Suffering from economic slowdown, Prime Minister Shinzo Abe seems to have decided to postpone raising consumption tax rate, planned in next April. Newspapers reported that Abe told on Saturday his colleagues to delay the date of consumption tax hike by two and a half years. New plan was set with consideration of political schedule. Abe supposedly wanted to avoid negative impact on election of House of Councillors in Summer 2019. His decision invited unexpected quarrels inside the leading party coalition.

The original schedule for raising consumption tax rate from 8% to 10% had been April 2015, based on an agreement between leading Democratic Party of Japan and opposite Liberal Democratic Party and Komeito. Abe decided delaying the schedule for one and a half years in November 2014. To listen to the voices of the people on his decision, he decided dissolving House of Representatives. “I will firmly raise consumption tax rate one and a half years later,” Abe promised then.

Minister of Finance, Taro Aso, opposed Abe’s plan from his standpoint for leading tax-increasing policy to improve financial balance. He focuses on fiscal discipline and maintenance of budget for social security. “We won an election with saying that we would raise the tax rate one and a half years later. It will be unreasonable not to have another election, if we postpone it again,” said Aso in his speech in Toyama on Sunday. Aso explicitly demanded dissolution of House of Representatives and simultaneous voting with House of Councillors in July.

LDP has same vision as Aso’s. LDP Secretary General, Sadakazu Tanigaki, followed Aso’s opinion in the same Toyama meeting. If Abe reschedules tax hike, it will be regarded as a failure of Abenomics, putting negative impact on the election. Simultaneous voting is expected to support the candidates of House of Councillors with multiplier effect.

Chief Cabinet Secretary, Yoshihide Suga, firmly opposes double election with consideration for negative opinion in Komeito. Suga thinks that election of House of Representatives is not immediately needed, because the leading parties already have two-thirds majority in the House and it is too early to have another election after only one and a half years later from the previous one.

It is unusual for highly unified Abe administration to show sharp opposition inside. Some predict Aso’s resignation as Minister of Finance, if his opinion is not accepted. Choosing double election or not, Abe will embrace fundamental antagonism in his administration.