FUEL COST UNCERTAINTIES

Storm over gasoline tax worries farmers

by Takahiro Fukada and Reiji Yoshida

Saddled with an annual fuel bill of about ¥3.1 million, potato farmer Katsuhiro Yamamoto, like many others who work the soil for a living, is keeping a nervous watch on lawmakers in Tokyo as they battle over the extension of higher gas tax rates.

The two cars, five trucks and five tractors Yamamoto operates on his farm in the central Hokkaido village of Nakasatsunai soak up about 10 percent of his business expenses.

Special laws on auto-related taxes are set to expire at the end of the month, but the political wrangling will not die with them.

“We cannot make any farming plan” because of the uncertainty of fuel costs, the 64-year-old Yamamoto said.

Extended as a matter of course by the Diet for decades, long-standing but technically provisional auto-related taxes used to fund road construction have been blocked this year by the opposition-controlled Upper House, which is led by the Democratic Party of Japan.

Attempting to break the deadlock, Prime Minister Yasuo Fukuda proposed Thursday allowing the road-specific tax revenues — earmarked solely for road construction — to be spent for other purposes beginning in fiscal 2009, which starts on April 1 of that year.

Unswayed, the opposition camp has so far failed to back the plan, leaving the fate of the auto-related taxes up in air.

If the tax rates are abolished as the DPJ has demanded, Yamamoto would save around ¥700,000 a year in fuel costs.

“Certainly a drop in fuel costs is the best thing we could hope for. We would be happy about that,” Yamamoto said. “(The Diet turmoil) is a little too much for us.”

Like Yamamoto, many farmers, fishermen, gas station owners, transportation companies as well as ordinary motorists are closely watching developments in the Diet.

And the impact on the average household will be significant, experts say.

If the higher rates on road-related taxes, including the gasoline tax, are abolished, ¥2.6 trillion in tax revenues would be cut in total a year.

According to Toshihiro Nagahama, senior economist at private think tank Dai-ichi Life Research Institute Inc., the average household would see its tax burden reduced by ¥32,000 a year.

“The impact on each household would be very big,” Nagahama said.

Polls by major media show that a majority of consumers feel they would benefit more from the elimination of the higher rates than they would from the road-building they fund.

According to a March 15-16 poll by Kyodo News, 61 percent of 1,023 respondents said the higher rates should not be extended beyond Monday, 3.9 points up from the previous poll in February.

“Recent rises in the gasoline price have affected me very much because I go to work by car every day. Now I will wait until the price goes down (when the law expires) to refill my tank,” said Junko Fukushima, a female office worker with two children who lives in Yokohama.

She believes the only way for opposition lawmakers to get the attention of the Liberal Democratic Party-New Komeito ruling bloc is to put up tough resistance in the Upper House, which they now control.

But more than simply checking the wasteful spending of taxpayer money, she also wants to see the DPJ engage the LDP in constructive policy debate.

Meanwhile, many living in rural areas, including Yamamoto, still apparently have mixed feelings about the looming cuts in gasoline prices.

People in the countryside, who tend to drive more than urbanites, stand to benefit more from cheaper gas.

According to estimates by Nagahama of Dai-ichi Life Research Institute Inc., the average household in the Hokuriku region would save ¥42,000 a year, while Kanto region households would save only ¥29,000 if the higher tax rates are abolished.

But public-funded road construction is still considered a key mechanism for propping up shrinking rural economies.

“(The abolition of higher rates) would affect various areas,” said Yamamoto, himself a supporter of the LDP. The construction of an expressway connecting his village to the neighboring city of Obihiro is now under way, Yamamoto pointed out.

“I am worried that might be affected,” he said.

What farmers want is stable fuel costs, he added.

“I would like to ask both the ruling and opposition parties to settle” the gasoline price row soon, Yamamoto said.