When Hiroshi Kato, president of Chiba University of Commerce, stepped into a Tokyo hotel room one day in the early 1980s, he soon realized he had violated a political taboo.
About 50 Liberal Democratic Party lawmakers were waiting for him — many of them furious. A heavy glass ashtray was hurled his way after some became excessively excited.
Kato had committed the faux pas of venturing to discuss revision of a set of sacrosanct tax revenues traditionally earmarked solely for the construction of roads across the country.
At the time, Kato was deputy chief of a government committee discussing the debt-ridden state-run Japanese National Railways. He was summoned immediately after he began arguing that part of the revenue collected for road construction be used to reduce the JNR debt, which had totaled some 28 trillion yen.
“Some lawmakers said my proposal was outrageous, and a fierce argument ensued,” said Kato, recalling that the LDP legislators tried to threaten him into withdrawing his remarks.
Kato claimed that since then, every time he raised the issue of expanding the use of the sacred tax revenues, the LDP’s “road tribe” — politicians supported by groups linked to road building — phoned him and heaped him with abuse and threats.
The LDP members last summoned him in April 2000 — two months before the June general election.
“They said they wouldn’t be able to win the election if I said such things,” said Kato, who was then chairman of the government’s Tax Commission.
This time, threats and ashtrays may be thrown at Prime Minister Junichiro Koizumi, who has made the same controversial suggestion as part of efforts to keep the state coffers from sliding into further disarray.
Koizumi has pledged to limit annual government bond issues to 30 trillion yen to curb the snowballing government debt. This translates into a reduction in state spending by more than 3 trillion yen for the next fiscal year, according to Finance Ministry estimates.
The prime minister has since embarked on a quixotic crusade by proposing that the road-specific tax revenues be allocated to cover general spending areas.
The money explicitly collected for roads — most of which comes from gasoline and vehicle taxes — now totals as much as 5.85 trillion yen annually, an amount larger than the nation’s defense budget of 5 trillion yen.
His proposal has already triggered a rebellion within the LDP, which he heads.
Construction companies have traditionally been one of the strongest vote-generators in Japan, particularly enjoying close ties with the LDP faction led by former Prime Minister Ryutaro Hashimoto.
House of Councilors member Mikio Aoki, a Hashimoto faction heavyweight, warned that LDP members should not discuss the idea of reforming the road revenue system before the Upper House election in July.
“I want (all members) to watch their mouths and not create obstacles for the Upper House election,” Aoki recently said.
The Hashimoto faction traces its roots to the politicians who gathered around the late Prime Minister Kakuei Tanaka — the king of pork-barrel politics — in the early 1970s.
It was Tanaka who drew up the Volatile Oil Tax Law in 1953, the first of a series of tax-related laws that stipulate revenues would go to road construction.
Road construction has been the biggest category in the nation’s ever-growing realm of public works outlays since at least 1965, despite great improvements in traffic infrastructure and other social changes, including eased economic growth.
But while economists and historians do not deny that road-specific revenues and spending played an important role in rebuilding the social infrastructure after the war, times have changed.
“The tax revenues were established because there were not enough roads. But now roads are being built merely because (the country) has the revenues to build them,” Kato of Chiba University of Commerce said.
He also noted that the LDP’s power over road-building budgets has been one source of its political clout.
The party still enjoys solid support in rural areas, despite their declining populations, because it has long protected small local contractors via laws and road-building budgets.
In 1966, the Diet passed the Public Demand Law, which obliges the central and local governments to increase procurement orders to small and midsize firms — at taxpayers’ expense.
By law, road project contracts are often split into small lots and meted out to local contractors.
As a result, the percentage of orders to small and midsize contractors increased from 26.8 percent in fiscal 1966 to 41.6 percent in fiscal 1999.
Most municipal and prefectural governments have made rules to exclude nonlocal, larger construction firms from their public works bids, and thus local politicians in turn maintain their influence.
This practice has fueled an explosion in the number of small road-paving firms. There were only 479 registered in 1966, but after the law’s enactment that year, the figure had jumped to 10,310 by 1975, 41,867 by 1985 and 90,096 as of this year.
Wide highways have always been a symbol of a politician’s ability to bring central and prefectural government money to a home constituency.
One famous road that runs up a hill in the city of Shobara in northern Hiroshima Prefecture, for example, has been dubbed “Kamei Road” by locals.
It is named after Shizuka Kamei, former construction minister and ex-LDP policy chief.
Many locals reckon the road, which stretches to where the lawmaker has a large residence and office, was the result of Kamei’s influence.
He has brought several large-scale public works projects to his constituency.
“The construction industry accounts for about 20 percent of the total income of city residents,” said an official at Shobara City Hall, adding that the city is a typical rural municipality with a decreasing and aging population.
“The only major employers you can find here are construction companies and municipal offices.
“Road construction is particularly promoted during economic slowdowns, when governments carry out pump-priming measures.”
Officials at the Land, Infrastructure and Transport Ministry, which controls 80 percent of public works budgets, appear at a loss amid the political turmoil over the tax issue.
Ministry officials gave up drafting their own review plan for the road-related taxes when a key advisory panel to Koizumi last week recommended that the revenues be diverted from roads to other general outlays.
“The report was drawn up by scholars, who refused to listen to our opinions in any way,” a senior ministry official said.
But can Koizumi win the battle by overcoming vested interests and die-hard “road tribe” lawmakers?
The answer is apparently on hold since LDP executives decided to put off any decision on the matter until after the Upper House election, given the contentious nature of the issue.
While Koizumi seems determined to immediately expand the use of the road-related tax revenues to general spending, he has indicated he will wait until after the election to get down to specifics.
“We’re hanging in the air between the party and the prime minister,” another official at the land ministry lamented.
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