A bill to increase the consumption tax has finally been submitted to the Diet. Approval is by no means assured, owing partly to the fact that the substance of the issue has changed since the idea of a consumption tax was originally formulated. The Liberal Democratic Party saw it as a source of funding for social-welfare programs, but the Democratic Party of Japan — which, when the LDP was in power, objected to any increase — now sees its purpose as something different. Prime Minister Yoshihiko Noda has melodramatically declared that he is staking his political career on passage of the bill, a stance whose desperation probably has the opposite of its intended effect, which is to convince the public that it’s really necessary.
An editorial in the April 1 Tokyo Shimbun questioned this tone of sacrifice, since most of the government’s plans for reducing expenditures have been put off. During an NHK interview last week, Noda explained the steep drop in public support for the tax increase as a misunderstanding on the part of the average person that all the government wants to do is increase the consumption tax; but what else is this average person to think after the DPJ postponed the reduction of politicians’ salaries and bureaucrats’ benefits, as well as the unification of pension schemes? The tax is no longer promoted as a source of revenue for social welfare. It’s simply a means of fending off insolvency. Of the proposed 5 percent raise, 4 percent will go to paying off the national debt.
Noda insists that a consumption tax is the fairest levy there is, an assertion Tokyo Shimbun challenges. Social welfare, if that’s the original reason for the consumption tax, comes down to income redistribution, which means its source should be progressive taxes, such as those based on income or corporate profits. Consumption taxes are more appropriate for funding local government schemes, since residents can directly benefit from services they all pay for equally.
These fundamentals have become twisted, and the consumption tax is now touted as the only solution to the country’s fiscal problems. How did it get to this confused juncture?
The economic writer who goes by the pen name Gucci-san has been railing against a consumption tax increase for years now, and in his most recent Aera column he blames the cloud of illogic on the media, which has done nothing to clarify the stakes involved. The only argument the mainstream press puts forth is that “the tax should be increased in order to rebuild Japan’s finances for future generations.” But few media outlets have undertaken an objective investigation into the size or extent of government assets, because the results would have to be “incorporated into the argument.” That, Gucci-san implies, is either beyond the comprehension of the media or not in its interests.
An article in Shukan Post’s Jan. 27 issue took a more populist approach to this idea, saying that the tax increase would only suppress consumption and drive thousands of small companies out of business, and then went on to explain how the major media (meaning not Shukan Post) had fallen under the spell of the Ministry of Finance, which has been pushing for a consumption tax increase forever and has always had Noda in its pocket. The Post claims that the media, in particular the dailies, have created a narrative uncontaminated by reality. In its typically sensational way, the weekly equates the selling of the consumption tax under Noda to the propaganda efforts of the major newspapers prior to and during World War II.
The Post claims that several prominent TV pundits, particularly former trade ministry employee Shigeaki Koga and former finance ministry official Yoichi Takahashi, both of whom are against a tax increase, have vanished from the airwaves, and even when they do appear their statements are edited so as to omit their most convincing arguments. Unnamed TV producers told the Post that network executives regularly receive phone calls from the finance ministry challenging opinions aired on their shows that counter the prevailing narrative. The executives are intimidated and make sure such opinions don’t get broadcast.
Then there is the annual meeting between the finance ministry and top editors from the dailies, where the former provides the latter with documents explaining its various positions. Newspapers tend to simply publish the positions as editorials, and if they don’t follow the ministry line it sicks the tax bureau on them. The one exception is Tokyo Shimbun, apparently because the paper’s point man, Yukihiro Hasegawa, is an expert on taxes. He was not invited to the most recent meeting and when he called to find out why was told that it was a “careless oversight.”
Given the Post’s predilection for anonymous sources and hyperbolic prose it’s necessary to take its allegations with a grain of salt. But then you read the recent Asahi Shimbun editorial by Masato Hara, who discusses the “conspiracy theory” that says Noda is a “puppet” of finance ministry honcho Eijiro Katsu, a theory which he says ignores Japan’s “huge deficit.” Without actually explaining how this deficit came about, he offers a bizarre justification of the finance ministry’s role as the convenient villain in the public imagination. The ministry takes the heat while acting as the “guardian” of the country’s economic well-being. What the public should be scared of is “that (the ministry’s) power to prevent bankruptcy may be restricted.”
If, as Hara contends, the finance ministry really does and should act as such a guardian and not be limited by elected officials, it not only calls into question his understanding of democratic principles but also leads the reader to conclude that the ministry created the very mess from which it is supposedly saving us. If that’s the situation, the only comfort this contention affords us is that at least we know who to blame.