Ruling bloc enacts ’08 budget in power play

by Setsuko Kamiya and Masami Ito

Turning a deaf ear to calls from opposition lawmakers for further deliberations, the Liberal Democratic Party-led coalition rammed the fiscal 2008 budget through the Lower House late Friday night.

With the passage through the Lower House, the LDP-New Komeito ruling bloc is now assured of enacting the budget before March 31, the last day of fiscal 2007.

Passing a budget before the previous one expires is considered a crucial mission for any Cabinet.

But with one key hurdle cleared with the passage of the ¥83.06 trillion budget, Prime Minister Yasuo Fukuda’s government still faces further political turmoil.

To implement key parts of the fiscal 2008 budget, starting April 1, budget-related bills must be approved by the opposition-controlled upper chamber by the end of March.

Under the Constitution, the budget will automatically take effect 30 days after being sent to the Upper House. But related bills need approval of the upper chamber.

Among them is a tax reform bill that contains a controversial clause to extend for another 10 years provisional rates imposed on auto-related taxes, including gasoline. Revenue from these taxes is solely used for road projects nationwide.

The Democratic Party of Japan, the main opposition force, has strongly protested the government’s plan to retain the special tax rates.

Earlier Friday, the DPJ submitted a series of its own tax reform bills, including one that stipulates the abolishment of the provisional rates on the auto-related taxes, which would lower gasoline prices and allow local governments to use road revenues for other purposes.

“As a parliamentary government, it’s a good thing if a constructive, better bill comes out as a result of deliberations (in the Upper House),” Chief Cabinet Secretary Nobutaka Machimura said, praising the DPJ for submitting the bill and hinting at the possibility of revising the tax reform bills.

However, if the tax reform bill is voted down by the Upper House, the coalition would be forced to use its two-thirds majority in the Lower House to override — as stipulated in Article 59 of the Constitution — the Upper House rejection. Such an override is rare, and for the ruling bloc, would risk drawing public criticism.

In addition, the ruling bloc and the opposition may tangle again as early as next week when the government is expected to submit the names of nominees for the Bank of Japan governor and deputy governors. The current incumbents’ five-year terms expire March 19.

By law, appointing the BOJ governor and vice governors requires the approval of both Diet chambers.

Current Deputy Gov. Toshihiro Muto is said to be the most likely candidate to succeed Gov. Toshihiko Fukui.

But some DPJ members believe Muto, a former Finance Ministry vice minister, should not head the central bank, in order to ensure the independence of the BOJ and to minimize the ministry’s influence. Some DPJ members hinted that Friday’s ramming of the budget and related bills by the ruling bloc could affect the approval process.