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LDP book hints ploy to divert sales tax yield to public works

by Reiji Yoshida

Staff Writer

In October, a group of influential Liberal Democratic Party lawmakers led by former transport minister Toshihiro Nikai published a 746-page book that remains little known to the public. The story: the hidden pump-priming plan the LDP might adopt should it return to power in the Dec. 16 House of Representatives election.

In the book, two members of the party openly and proudly discuss a plan to divert much of the revenue from the consumption tax to drastically boost public works after the scheduled doubling of the levy in 2015.

“At least half of the (revenue) increase should be used to issue construction bonds” to expand the budget for public works, veteran lawmaker Bunmei Ibuki is quoted as saying in “Nihon wo Tsuyoku Shinayaka ni, Sono ni” (“Making Japan Strong and Pliable, Vol. 2″).

Construction bonds are a special type of government debt that would be issued to finance public works projects, such as new roads, bridges and rail lines. The plan, however, would break the LDP’s recently released election promises, which commit all revenue from the sales tax to social security.

That’s what the LDP, opposition ally New Komeito and the ruling Democratic Party of Japan agreed to do in June when they joined hands to pass the bill to double the tax rate in two stages by 2015. Ibuki was one of the key players in the negotiations.

In the book, Takeshi Noda, head of the LDP’s tax research panel, insists the party would “never use the revenue from the consumption tax for public works” but would just “stop curbing public works budgets,” since much of the funding for social security will be supplied by the tax hikes.

“We would no longer cut down areas that have already been reduced. In that sense, (enacting the tax bill) was really good,” Noda is quoted as saying.

The Nikai-led group’s call for massive public works spending is based on another piece of legislation the LDP submitted to the Diet in June called the National Land Strengthening bill, which would oblige the central and local governments to draw up programs for reinforcing social infrastructure in certain areas so they can better withstand natural disasters.

The group said the monster tsunami that devastated Tohoku’s coastline in March 2011 underlined the need to strengthen infrastructure.

But many of the projects cited in the book appear to be about the same as the ones the LDP devised for the expansive fiscal policies of yesteryear, including expressways, dams, fishing ports and bullet train networks.

The LDP’s dependence on public works for temporary growth has been criticized for failing to prevent Japan’s prolonged decline over the past two decades.

The failure to produce sustainable growth has left the country with the largest government debt in the developed world and at risk of becoming Asia’s version of Greece.

The policy pledges announced by LDP President Shinzo Abe on Nov. 21 do not include a single word on measures to pare the government’s debt.