Prime Minister Naoto Kan, in his policy speech before the Diet on Monday, expressed his determination to carry out unified reform of the social security and the tax system, which would include raising the consumption tax, and “opening the nation” in the 21st century through large-scale trade liberalization.
He said his Cabinet will announce its basic policy directions on these issues by June and called on opposition forces to positively join discussions with the ruling Democratic Party of Japan to form a consensus. By making the call, Mr. Kan, whose Cabinet is suffering from an approval rate of only around 30 percent, apparently intends to counter moves by opposition forces, which control the Upper House and are stepping up their attacks on the Kan administration.
Mr. Kan mentioned “opening the nation” and trade liberalization following his opening remarks. Noting that the opening of Japan through trade and investment liberalization and freer movement of human resources would enable Japan to share in global economic prosperity, he said that Japan will speed up or launch talks on free trade agreements with Australia, South Korea, the European Union and Mongolia, and will decide by June whether to take part in full negotiations to join the Trans-Pacific Partnership, a regional free trade zone agreement pushed by the United States and eight other countries.
Mr. Kan suddenly started talking about the TPP last fall, although participation in the TPP will radically change the shape of Japan. In fact, the DPJ’s election manifesto makes no mention of the TPP. It seems that Mr. Kan has forgotten a simple fact: that the U.S. is trying to use the TPP as a means of promoting its own national interests, namely strengthening its economic positions in the Asia-Pacific region. The TPP is not necessarily a helping hand being extended to Japan.
It is reasonable for Japan to pursue “strengthening of international trade rules” through the Doha round negotiations under the World Trade Organization, as the Doha round is aimed at setting better global trade rules. The TPP, however, is a regional economic bloc; its ultimate goal is eliminating tariffs.
Mr. Kan must remember that the right to set tariff rates is one of the basic rights of a sovereign nation and that Meiji Japan gained that right back through hard negotiations with Western powers. One wonders whether Mr. Kan deeply thought about this history. The TPP negotiations will be a venue where national interests of participating countries will sharply clash.
Mr. Kan said that to realize the opening of Japan, Japan must revitalize its agriculture, forestry and fisheries. Irrespective of whether Japan joins the TPP, this is an important point. As Mr. Kan said in his speech, Japanese agriculture should seek to closely combine with retail and manufacturing industries so that its products find more customers both in Japan and abroad.
The TPP would greatly affect not only agriculture but also other industries such as the retail, financial and service industries, including medical services. Mr. Kan has made no mention of this point. The public has not yet been provided with full explanations about the TPP. One wonders whether Japan can reach a domestic consensus on the TPP and make necessary preparations for its participation in such a short time.
As for the social security system, Mr. Kan said Japan is facing difficulty in securing funds to pay for the increasing cost of social welfare measures and that the government has no choice but to ask people to shoulder a bigger financial burden to achieve a sustainable social welfare system. In the long run, tax and social insurance premium increases are inevitable. But Mr. Kan must consider the danger that, given the current stagnation in the economy, talk about tax increases could negatively affect the economy, leading to further declines in the future tax base.
Before making tax proposals, Mr. Kan must present a concrete plan to reform the social security system. Unless people understand that tax increases are closely linked to the DPJ’s slogan “People’s lives come first” and will be used for improvement of the social welfare system, they will strongly resist tax increases.
As a way of reducing government waste as a precondition for tax hikes, Mr. Kan proposes decreasing the number of Diet members. This could lead to suppression of minority opinions. He should concentrate on how to make the Diet and its members function better to improve people’s well-being.
Mr. Kan has presented a clear political agenda, but the big problem is that opposition forces won’t cooperate with him. How can they when the government’s approval rate is so low and when a key Cabinet post appointment has been given to Mr. Kaoru Yosano, a former influential member of the Liberal Democratic Party member and foe of the DPJ, who could become easy prey for opposition forces?